Having unveiled plans to pay US$1.1 billion for a 60 per cent shareholding in Unitech Wireless, a new Indian mobile cellphone operator, Norway's leading telecoms operator, Telenor, is now thought to be struggling to raise the necessary funds. A US$1.8 billion rights issue to support the Unitech acquisition has run into resistance from Telenor shareholders and company executives are now said to be searching for alternative options.
Telenor's share price had plunged to a near five-year low following the rights issue decision, but rose seven per cent as news leaked out that this fund raising exercise might not go ahead. The company has since attempted to play down this shareholder revolt, insisting that no changes had been made to the planned rights issue to fund its expansion into India.
Industry analysts have questioned Telenor's move into India given that three large operators are already established and competition is becoming fierce. Unitech has admitted it will require a capital spending plan of US$2 billion over the next three years to deploy a new mobile network, and Telenor has confirmed it did not expect its Indian venture to break even until sometime in 2012.
What is now being suggested by market watchers in Norway is that a dividend cut by Telenor would be a better option to raise the necessary finance instead of exiting from new ventures when asset values are low.
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