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Telenor has emerged as a frontrunner after talks with Telecom Italia got stuck to a valuation of $1 billion.

The second generation entrants in the telecom arena have started getting JV proposals from international players who are yet to open an account in the world's fastest growing telecom market. Norway's telco Telenor is talking to pick up a 26% stake in Unitech Wireless, the telecom arm of real estate firm Unitech for around $500 million (Rs 2,200 crore) valuing the firm at around $2 billion.

As per this report Telenor is close to striking the deal which would value the start-up at $2 billion, even as Unitech is negotiating for a higher valuation. Unitech chief Sanjay Chandra said that he is still negotiating with many parties and would take another month to finalise the partner without confirming the name of the possible partners.

The company had shortlisted three firms including Telenor, Telecom Italia and a South-East Asia-based telecom firm for the negotiations. The report adds that Telenor has emerged as a frontrunner after talks with Telecom Italia (stuck to a valuation of $1 billion) couldn't progress over valuation. The promoters are reportedly looking at a valuation of $3 billion.

Unitech has licences to operate in all 22 telecom circles and has also received spectrum for six circles. It expects to roll out its services in the first quarter of calendar year 2009. The company had earlier said it expected to invest Rs 20,000 crore (~$ 4.5 billion) in its telecom business over the next three years.

It recently raised Rs 1,200 crore for its telecom venture from a syndicate of public sector banks led by Punjab National Bank and Canara Bank.

Unitech is one of the six new companies that were successful in winning GSM licences earlier this year. The others include Datacom, Loop Telecom, S Tel and Swan. All these companies are scouting for funds and are at various stages of negotiations. The market meltdown has come as a blow to all of them.