The Unitech – Telenor telecom deal, which was earlier expected to close by December, 2008, will now be closed by January 2009. The deal closing is witnessing a delay as the closing of the transaction is subject to certain conditions being fulfilled. Both Unitech and Telenor anticipate that all the conditions for closing the deal would not be fulfilled before December 2008. The delay in this deal means that the real estate giant will have to keep the debt taken on account of its telecom unit on its books for a longer period of time. Unitech Ltd had agreed in October, 2008 to sell its 60% stake in its telecom venture for about Rs 6,120 crore (about $1.23 billion) to Telenor, which is the world’s 7th largest telecom operator.
The delay has been caused as Telenor is still evaluating alternatives to fund the deal with Unitech. Telenor was expected to raise 12 billion Norwegian Kronor (about Rs 8,285 crore) through a rights issue, but the present market conditions and the lower valuation do not seem very viable for it. Telenor was said to be evaluating alternatives as cutting dividend, asset sales and lower investments.
However, reports suggest that the delay is on the account of the completion of the tower sharing agreement between Unitech and other service providers and the conversion of Unitech’s all 8 telecom subsidiaries into Pvt. Ltd. companies. While 5 of its subsidiaries have already been converted into Pvt. Ltd. companies, three are expected to be converted soon.
The real estate company, Unitech Ltd, has consolidated debt of nearly Rs 8,000 crore, and has to make a payment of Rs 2,700 crore of debt obligations by March. A debt of Rs 2,000 crore has been taken on account of Unitech Wireless, in which the firm has sold 60% Norway’s Telenor. The company will transfer the Rs 2,000 crore debt to Unitech Wireless.
Unitech also plans to merge all its eight telecom subsidiaries so as to consolidate the telecom business. However the merger would only happen post the launch of the services. In order to keep its expenditures low, Unitech had decided to share the existing infrastructure instead of constructing its own towers, for which it is expected to pay an average rental of Rs 25,000 per tower. The completion of this tower sharing agreement is also a reason for the delay in the closing of the deal.
The realty major had also signed a binding agreement with Telenor in October, 2008 and is now completing all the formalities. Unitech has been allotted a spectrum of 16 circles and each of its subsidiaries has licences for three to four circles.