Telenor deal with Unitech. From : Taruna Dalwala Tasneem Sutarwala Tasneem Sutarwala To, Prof. Hiren patel

Company Info SALES* ($ MILLIONS) 11,348.6 Sales Growth (over prev. year) 14 % PROFITS* ($ MILLIONS) 1,259.5 Return on Equity16.5 % TOTAL RETURN ON SALES (12-MO.) 52.9 Share Price As of 5/31/ No. of Employees27,600 INDUSTRYTELECOMMUNICATIONS HeadquartersIndia Industry Telecommunicati ons TypePublic Company Company Size500 employees Website eless.co...

Information about deal Deal Type Acquisition Deal Type Acquisition Sub-Category Minority Acquisition Sub-Category Minority Acquisition Target (Company) Unitech Wireless Target (Company) Unitech Wireless Acquirer (Company) Telecom Italia S.p.A. Acquirer (Company) Telecom Italia S.p.A. Vendor (Company) Unitech Limited Vendor (Company) Unitech Limited % Acquisition 49%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. % Acquisition 49%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. Telenor's Unitech deal finalised; to get 67.25% instead of 60% Telenor's Unitech deal finalised; to get 67.25% instead of 60%

Benefits to telenor Telenor's Unitech deal finalised; to get 67.25% instead of 60%,so effectively valuing the deal 11 per cent cheaper. Telenor's Unitech deal finalised; to get 67.25% instead of 60%,so effectively valuing the deal 11 per cent cheaper. Telenor is also looking at an entry into third generation (3G) mobile services, which are yet to be launched in India. Telenor is also looking at an entry into third generation (3G) mobile services, which are yet to be launched in India.

Why deal became Cheaper ? Because of A steep fall in stock prices has forced ailing realty major Unitech to dilute per cent in its mobile operations. Because of A steep fall in stock prices has forced ailing realty major Unitech to dilute per cent in its mobile operations. & unitech debt is over 8100 crore. & unitech debt is over 8100 crore.

Benefits to Unitech The deal will help Unitech Ltd reduce its debt as it will no longer have to guarantee the loans, which have been given by banks to Unitech Wireless. The deal will help Unitech Ltd reduce its debt as it will no longer have to guarantee the loans, which have been given by banks to Unitech Wireless. The new deal puts the enterprise value = The new deal puts the enterprise value = the sum of a company’s market capitalisation + debt - cash the sum of a company’s market capitalisation + debt - cash 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. & telenor give1250 crore for first stage of deal. 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. & telenor give1250 crore for first stage of deal.

Benefit to both Unitech Wireless, a telecom venture of the realty major Unitech Group and Norway’s telecom operator Telenor has got both National and International Long Distance Licenses (NLD and ILD). Unitech Wireless, a telecom venture of the realty major Unitech Group and Norway’s telecom operator Telenor has got both National and International Long Distance Licenses (NLD and ILD). The NLD and ILD licenses will enable the telecom operator to provide cost-effective STD and ISD call services to its mobile subscribers. It will also help the operator to save on traffic carriage expenses as it will be carrying its own traffic in NLD and ILD segments. The NLD and ILD licenses will enable the telecom operator to provide cost-effective STD and ISD call services to its mobile subscribers. It will also help the operator to save on traffic carriage expenses as it will be carrying its own traffic in NLD and ILD segments.

Problem to Telenor Telenor also want to invest up to Rs 11,200 crore ($2.24 billion) in Unitech Wireless. So that company need a fund. Telenor also want to invest up to Rs 11,200 crore ($2.24 billion) in Unitech Wireless. So that company need a fund. Telenor is funding the deal through combination of cash flow & additional debt. Telenor is funding the deal through combination of cash flow & additional debt. The Indian arm of Norwegian telecom group Telenor has raised Rs 5,000 crore as a bridge loan from State Bank of India to fund the roll-out of its operations in the world’s fastest-growing mobile market. The Indian arm of Norwegian telecom group Telenor has raised Rs 5,000 crore as a bridge loan from State Bank of India to fund the roll-out of its operations in the world’s fastest-growing mobile market.

Reason for delay of Deal Reason for delay of Deal unitech debt unitech debt Telenor took time to arrange funds. 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 took time to arrange funds. 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 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. 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.

Now in current venture of Unitech Ltd and Norway’s Telenor, plans to launch its mobile services by December 2009, with initial rollout in eight circles, four in south, two in Uttar Pradesh and one each in Bihar and Orissa.