Telenor to seek compensation from India if 2G licenses are canceled

A court has ordered that 122 licenses should be canceled because of irregularities in allocation

Telenor will ask for compensation from India if the country goes ahead with the cancellation of its 2G mobile licenses as ordered by a court, a company spokesman said.

The Norwegian telecommunications company however said that it continued to be hopeful that the issue could be resolved by dialogue with the Indian government. It did not specify what was the amount of compensation it expected from the Indian government, though it said it plans to seek compensation for "all investment, guarantees and damages."

"We are hopeful that it remains the government's intent to protect and encourage bona fide foreign investment in the country," Telenor spokesman Glenn Mandelid said in an email on Tuesday.

India's Supreme Court ruled in February that 122 licenses awarded across 22 service areas in 2008 should be cancelled within four months, as there were irregularities in their allotment.

Among the companies that are likely to be affected are the Indian ventures of Telenor, NTT DoCoMo, Emirates Telecommunications, and Sistema of Russia.

Telenor stands to lose all its 22 2G licenses, and is considering action against India under a treaty between Indian and Singapore, as the investments in India were made by Telenor's subsidiary in Singapore, Mandelid said.

The Norwegian company has a 67.25 percent stake in Indian joint venture, Unitech Wireless, and said in February it had decided to write down NOK4.2 billion (US$733 million) related to the licenses and goodwill in India. It has also demanded indemnity and compensation for the loss of licenses from its Indian partner, citing a shareholder agreement.

The amount the foreign operators paid for their stakes in joint ventures was far higher than the Indian companies had earlier paid for the licenses, which were offered at basement prices in 2001, the court said in its ruling.

Emirates Telecommunications, a mobile operator in the Middle East known as Etisalat, said in February that it was suspending its network and services in India following the court order.

Sistema, whose joint venture in India could also lose 21 licenses, has also sent a notice in February to the Indian government invoking a Bilateral Investment Treaty between India and the Russian government. The cancellation of the licenses is contrary to India's obligations under the treaty to provide investments with full protection and security and not to expropriate investments, it said. Sistema has given the Indian government six months to resolve the dispute amicably.

Indian government officials were not immediately available for comment.

The Indian government as well as some of the affected companies like Sistema have filed before the Supreme Court for a review of its ruling. On the instructions of the court, India's telecom regulator, Telecom Regulatory Authority of India, has started discussions on an auction of the spectrum released by the license cancellations, which may see some of the affected companies bidding.

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