A Case study on the cancellation of Telenor's 2G License.

1. Will Telenor Fight its way back???
(Case Study of Telenor’s Loss due to 2G Scam)
SUBMITTED BY :
Aabhas Rastogi
AnuragBhargav
Abhishek Gupta
Joseph Thomas
Mayank Gaur
MayankSahajwani
ParasArora
TarunGautam

2. INTRODUCTION
"The ruling is a very serious attack on our investments, (which are) based on the license
framework that was spelt out in 2008,"this was the reaction of Jon Fredrik BaksaasCEO of
Telenor following the Supreme Court verdict on cancellation of 2G licenses. He further added
“We met every inch of that regulation of that license. We have brought competition to the Indian
market ... just to see a ruling that has significant retroactive consequences. It is an action that we
have never seen in any country before." Baksaas’ anxiousness was revealed in an interview
where he was also quoted saying “Obviously in a situation with the threat of taking your license
taken away, the value chain will start asking questions,". Telenor known as Uninor in India
claims that it has to bear huge losses, even though the whole fiasco was on part of Indian
government. 2G scam has greatly affected Norwegian firm Telenor as they are already in two
thirdways of their investments. This has created such huge repercussions that Norwegian IT
Minister Mr.RigmorAasrud is planning to meet Mr. KapilSibal Indian telecom minister
concerning the matter. Relation between two countries are now at stake and all further foreign
investments will be skeptical, what Indian Government plans to do as next step to maintain its
credibility.
BACKGROUND
Telenor Group is the incumbent telecommunications company in Norway, with headquarters
located at Fornebu, close to Oslo. Today, Telenor Group is mostly an international wireless
carrier with operations in Scandinavia, Eastern Europe and Asia, working predominantly under
the Telenor brand. At the end of 2010, its 203 million subscribers made it one of the largest
mobile phone operators in the world. In addition, it has extensive broadband and TV distribution
operations in four Nordic Countries, and a 10-year-old research and business line for Machine-
to-Machine technology.
At year-end 2005, Telenor held controlling interests in mobile operations in Norway, Denmark,
Sweden, Serbia, Ukraine, Hungary, Montenegro, Thailand, Malaysia, Bangladesh, India and
1

3. Pakistan. Telenor also holds minority interests in mobile operations in Russia, having recently
sold a minority share in Austria.
Telenor's mobile commitments in Asia and Eastern and Central Europe are becoming
increasingly important and to ensure optimal follow-up, Telenor has appointed dedicated
Executive Vice Presidents for these regions. Telenor has also strengthened the co-ordination of
operational and human resources across all the countries in which the group has operations
through the appointment of two new Executive Vice Presidents to the Group Executive
Management.
TELENOR ENTRY IN INDIA
Telenor's joint venture with Unitech, which operates under the Uninor brand, has been among
the most aggressive of India's newer telecoms companies. The Telenor Group invested INR
61.35 billion through new shares to hold 67.25% majority stake in the company. This investment
has been used as working capital for the joint venture. Telenor’s investments in Unitech Wireless
have been cleared at each stage by the Foreign Investment Promotion Board (FIPB). Uninor has
close to 40 million customers, or more than 4 percent of the market.
Uninor started its mobile services on 3 December 2009, in 21 of the 22 circles in India. Telenor
has acquired a 67.25% equity stake in Unitech Wireless, which has the requisite government
approvals and licenses to provide mobile services pan-India. It has rolled out its network nation-
wide under the brand name Uninor. Since August 2010, Uninor has been growing at a rapid
pace, adding 1.5-2 million customers every month. Optimizing its operations with limited
spectrum available, Uninor has pioneered a number of network capacity innovations and
operational excellence efforts that can potentially be applied also in other Telenor markets.
Uninor’s Corporate Office is located in Gurgaon, Haryana, just outside Delhi. It has 13 circle
offices, one in each of the circles where its services are commercially available, as well as a
number of zonal offices and technical offices.
The circles offices are in: Kochi – Kerala circle, Chennai – Tamil Nadu circle, Bengaluru –
Karnataka circle, Hyderabad – Andhra Pradesh circle, Bhubaneswar – Orissa circle, Kolkata –
Kolkata circle, West Bengal circle, Patna – Bihar & Jharkhand circle, Lucknow – Uttar Pradesh
2

4. East circle, Noida – Uttar Pradesh West circle, Pune – Maharashtra & Goa circle, Mumbai –
Mumbai circle, Ahmedabad – Gujarat circle.
CONTROVERSIES
2G LICENSE ALLOCATION
Unitech Wireless was one of the would-be telecom companies that received 2G licenses in 2008.
In 2008, 122 new 2G spectrum licenses were given to telecom companies at the price of 2001
and on first come first serve basis. (Refer Appendix 1.1). The Central Bureau of Investigation
(CBI) says that several rules were violated and bribes were paid to favor certain firms while
awarding 2G spectrum licenses. The method chosen by the authorities to allocate these licenses
has later been subject to controversy as part of the 2G license allocation case. Under auction
process of 2G licenses, eight companies belonging to the Unitech Group were awarded telecom
licenses. The licenses obtained by the telecom arm of the Unitech Group were the basis for
Telenor Group’s investment into the joint venture. Unitech Wireless companies were later
amalgamated into one company, Unitech Wireless (Tamil Nadu) Pvt. Ltd.
Companies like Unitech & Swan Telecom got licenses without any prior telecom experience.
Unitech Wireless, a subsidiary of the Unitech Group, got license for Rs. 1661 crore and later sold
60% stake for Rs. 6200 crore to Norway based company Telenor.
Due to the controversy of the 2G license allocation case (Refer Appendix 1.2 for 2G scam),
Unitech Ltd.'s Managing Director Sanjay Chandra (who was also earlier the Chairman of the
Board of Unitech Wireless) together with the company Unitech Wireless, have come under
investigation by the Indian Central Bureau of Investigation (CBI).Mr Sanjay Chandra during his
investigation said, “Unitech ltd is a responsible for corporate, functioning within the the
guidelines prescribed by the sovereign government and abiding by the law of land has been fully
co-operating with the investigating agency. Unitech has co-operated wilth all the investigating
agencies from the very beginning, as we have nothing to hide. "
These investigations are connected to Unitech Wireless at a point when the company was fully
owned by the Unitech Group. Subsequently, Unitech’s Managing Director and the erstwhile
chairman of the board of Unitech Wireless, Sanjay Chandra, together with individuals from other
3

5. telecom operators were taken into custody in early 2011. This trial is now ongoing in the Indian
courts.
In February 2012, a special court consisting of two Supreme Court justices issued a judgment in
a public interest litigation (PIL) case connected to the 2008 allocation of telecom licenses. The
judgment directs the Indian telecom regulator, TRAI, to recommend a process for re-allocation
of the 121 licenses that were issued in 2008. This process must be concluded within four months,
i.e. by June 2012. Uninor operations and services continue and will not be interrupted.
SPAT BETWEEN UNITECH AND TELENOR
The spat between Unitech and Telenor has also intensified, with the Indian real estate major
questioning its Norwegian partner for allowing MrSigveBrekke to continue to be Uninor's chief
despite not getting security clearance. According to rules specified for telecom companies,
foreigners holding top positions are required to get security clearances every year. MrBrekke had
applied for the clearance in November 2011 but has not got the approval so far.
When contacted, the Telenor spokesperson said that the delay in getting clearance was due to
procedural issues within the Government.
“MrBrekke accepted the position of MD of Uninor after full security clearance from the DoT.
The extension of this clearance has been applied for and is currently being processed. We have
not received any query or request for any additional information of any sort from the DoT
regarding this process. Furthermore, it is commonplace for procedural delays at the DoT for such
processes and these have happened for several other expat MDs of Indian telecom companies,”
the Telenor spokesperson said.
Unitech had raised this issue along with Telenor's Pakistan connection at Uninor's board meeting
on Thursday. At the meeting, Unitech and Telenor agreed to set up two committees to manage
expenses and projects undertaken by Uninor. The two committees will be headed by the
nominees of Unitech.
4

6. But there are differences on the mandate of these committees. The two partners also differ on the
need for a rights issue, with Unitech opposing the move.
INVESTESMENTS AT STAKE
All these controversies affected the Telenor’s shares which were down by 2%. Norway's leading
telecom firm Telenor announced it will write down around Rs 3,570 crore in 2G licences and
India goodwill on its accounting books.
Further it has said that it would file a review petition in the Supreme Court and also take up the
matter with the government to secure its over Rs 14,000 crore investment.The telecom company
has also discussed the issue with the Norway Government and it is said that the Norwegian
Government are ready to support them.The Norwegian Government has majority 54 percent
stake in Telenor Group, which in turn has over 67 percent stake in Uninor with remaining being
held by Unitech. Telenor is said to have around 4.2 billion crowns ($722 million) related to its
Indian operations.Losses to Telenor group have created impact on relations between Norway and
India, to add on to this Norwegian IT Minister is planning to get in talks with India. The
company, however, asserted that it was waiting for new rules on spectrum auction and said it
would participate in it but did not rule out exit option depending upon its success in acquiring
spectrum.
Of course exit will always be an option for Uninor, but is Uninor willing to lose its investments
without a fight???
KEYWORDS:
2G licenses,Unitech, Telenor, Uninor,Norway Government, TRAI,Telecom Regulator, Spectrum
Auction
5

7. Appendix 1.1
6

8. Appendix 1.2
CHRONOLOGY OF 2G SCAM
2007
May: Raja takes over as Telecom Minister.
Aug: Process of allotment of 2G Spectrum for telecom along with Universal Access
Service (UAS) Licences initiated by the Department of Telecommunications (DoT).
Sept 25: Telecom Ministry issues press note fixing deadline for application as October 1,
2007.
Oct 1: DoT receives 575 applications for UAS licences of 46 companies.
Nov 2: PM writes to Raja directing him to ensure allotment of 2G spectrum in a fair and
transparent manner and to ensure licence fee was properly revised. Raja writes back to
PM rejecting many of his recommendations.
Nov 22: Finance Ministry writes to DoT raising concerns over the procedure adopted by
it. Demand for review rejected.
2008
Jan 10: DoT decides to issue licences on first-come-first served basis, preponing the cut-
off date to September 25, from October 1, 2007. Later on the same day, DoT posted an
announcement on its website saying those who apply between 3.30 PM and 4.30 PM
would be issued licences in accordance with the said policy.
Swan Telecom, Unitech and Tata Teleservices sell off a part of their stakes at much
higher rates to Etisalat, Telenor and DOCOMO respectively.
Nov 29: Subramanian Swamy makes representation to the PM, seeks sanction to
prosecute Raja under the Prevention of Corruption Act.
7

9. 2009
May 4: NGO Telecom Watchdog files complaint to CVC on illegalities in spectrum
allocation to Loop Telecom.
CVC directs CBI to probe allocation of 2G spectrum.
July 1: Delhi HC holds advancing of cut-off date as illegal on a petition of telecom
company S-Tel.
Oct 21: CBI lodges FIR against unknown persons including DoT officials under the IPC
and the Prevention of Corruption Act.
Oct 22: CBI raids DoT offices.
Nov 16: CBI seeks details of tapped conversation of corporate lobbyist NiiraRadia to find
out involvement of middlemen in grant of spectrum to telecom companies.
2010
Mar 31: CAG reports large scale irregularities.
May 6: Telephonic conversation between Raja and Radia made public.
NGO Centre for Public Interest litigation moves Delhi HC seeking probe into scam either
by SIT or CBI.
May 25: Delhi HC dismisses the petition.
Aug 10: The NGO moves SC against HC's verdict.
Aug 18: Delhi HC refuses to direct PM to decide on Swamy's complaint seeking sanction
to prosecute Raja for his involvement in 2G scam.
Sept 13: SC asks Centre, Raja to reply in 10 days to three petitions of CPIL and others on
allegation there was aRs 70,000 crore scam.
Sept 24: Swamy moves SC seeking direction to the PM to sanction Raja's prosecution.
8

10. Oct 8: SC asks government to respond to CAG report about the scam.
Oct 21: Draft reports of CAG placed before SC.
Oct 29: SC pulls up CBI for tardy probe in the scam.
Nov 10: CAG report says the scam caused a loss of Rs 1.76 lakh crore to exchequer.
(More) PTI AKI SJK RKS
Nov 11: DoT files affidavit in SC saying CAG did not have authority to question policy
decision on 2G licenses.
Nov 14: Raja resigns as Telecom Minister.
Swamy's plea on sanction to prosecute Raja becomes infructuous. He seeks guidelines on
grant of sanction to prosecute public servants for offences under the Prevention of
Corruption (PC) Act.
Nov 20: PM files affidavit in SC. Rejects charge of inaction on Swamy's complaint.
Nov 22: CBI tells SC that it will file charge sheet in the case within three months.
Nov 22: CBI tells SC that it will also examine the role of Radia.
Nov 24: SC reserves verdict on Swamy's plea seeking direction to PM for grant of
sanction to prosecute Raja.
Nov 25: SC ticks off CBI for not questioning Raja.
Nov 29: CBI files status report on probe in the case.
Nov 30: SC questions CVC P J Thomas's moral right to supervise CBI's probe into 2G
spectrum scam as he himself was Telecom Secretary at that point of time.
Dec 1: SC seeks original tapes on conversation between corporate lobbyist NiiraRadia
and others.
Dec 1: Raja questions CAG findings in SC.
Dec 2: Government places recorded tapes in the SC.
Dec 2: SC comes down on Raja for overruling PM's advice to defer allocation of 2G
spectrum by a few days.
Dec 8: SC favours probe into spectrum allocation since 2001.
Dec 8: SC orders setting up of a special court to try 2G spectrum scam case.
9

11. Dec 8: ED submits report. Says money trail covers 10 countries, including Mauritius.'
Dec 14: Another PIL in SC for cancellation of telecom licences granted by Raja.
Dec 15: Swamy, in complaint, says Raja favoured "ineligible" companies like Swan
Telecom and Unitech.
2011
Jan 4: Swamy also seeks cancellation of 2G licenses.
Jan 10: SC notice to Centre on the plea seeking cancellation of 2G licenses. It also seeks
responses from 11 firms for not fulfilling roll-out obligations.
Feb 2: Raja, former Telecom Secretary SiddarthaBehura and Raja's former Personal
Secretary R K Chandolia arrested.
Feb 8: ShahidUsmanBalwa, promoter of Swan Telecom, arrested.
Feb 10: SC asks CBI to probe corporate houses, alleged beneficiaries of the 2G scam.
Mar 1: CBI tells SC that 63 persons were under its scanner.
Mar 14: Delhi HC sets up special court for 2G case.
Apr 2: CBI files first charge sheet in the case.
Apr 25: CBI files second charge sheet and Kanimozhi, Sharad Kumar and KarimMorani
summoned.
May 20: Court rejects bail pleas of Kanimozhi and others and orders their arrest.
July 25: Arguments on charge framing begins. Raja seeks to make PM and P
Chidambaram as witnesses.
Aug 23: Swamy moves SC for making Chidambaram as accused.
Sept 8: SC asks Swamy to submit his correspondences with CBI in connection with his
plea to probe Chidambaram for his alleged role in the 2G scam.
Sept 8: SC agrees to hear CPIL's plea for setting up of a Special Investigating Team (SIT)
to monitor probe.
10

12. Sept 15, 2011: Janata Party's Swamy moves Special CBI court to make Chidambaram a
co-accused.
Sept 22: CBI defends Chidambaram in SC, blames DoT.
Sept 29: CBI says role of Anil Ambani being probed, gives a clean chit to Tata and
Videocon group.
Oct 10: SC reserves order on Swamy's plea for a probe into the alleged role of
Chidambaram in the 2G scam.
Oct 22: Special court frames charges against Raja and 16 others in the 2 G case.
Nov: Barring Raja and Behura, 12 others get bail.
Dec 12: CBI files third charge sheet. Names Essar promoters Anshuman, Ravi Ruia,
Essar Group director (Strategy and Planning) VikasSaraf, Loop Telecom promoters
KiranKhaitan and her husband I P Khaitan as accused.
Three companies -- Loop Telecom, Loop Mobile India and Essar Tele Holding also
named as accused.
2012
Jan 31: SC says filing complaint under the PC Act is a constitutional right and the
competent authority should take a decision on giving the sanction within four months.
Feb 2: SC cancels 122 licences granted during Raja's tenure. Directs auctioning of
licences in 4 months; SC leaves it to the special court to decide on Chidambaram within 2
weeks ; Asks CBI to give status report on probe to CVC, making it a virtual SIT.
11

13. REFERENCES
1. http://profit.ndtv.com/News/Article/telenor-to-write-down-rs-3-570-crore-in-2g-licenses-
297162
2. http://www.thehindubusinessline.com/companies/article2811714.ece
3. http://www.thehindubusinessline.com/industry-and-economy/info-
tech/article2799000.ece?ref=wl_industry-and-economy_art
4. http://articles.economictimes.indiatimes.com/keyword/telenor/recent/5
5. http://zeenews.india.com/business/companies/2g-global-telcos-take-battle-to-diplomatic-
level_38450.html
6. http://economictimes.indiatimes.com/news/news-by-industry/telecom/telenor-says-will-
fight-indian-licence-cancellation/articleshow/11780435.cms
7. http://www.thehindubusinessline.com/companies/article2811714.ece
8. http://www.thehindubusinessline.com/industry-and-economy/info-
tech/article2799000.ece?ref=wl_industry-and-economy_art.
9. http://en.wikipedia.org/wiki/Telenor#References
10. http://businesstoday.intoday.in/story/2g-spectrum-scam-chronology-supreme-court-
verdict-licences/1/22122.html
11. http://articles.timesofindia.indiatimes.com/2012-02-03/telecom/31020709_1_norwegian-
telecom-firm-telenor-jon-fredrik-baksaas-licences
12. http://www.deccanjournal.com/telenor-to-write-down-724-5-mn-investments-in-uninor/
13. http://indiatoday.intoday.in/story/2g-scam-norway-russia-likely-to-sue-
india/1/171960.html
12