Norway-based Telenor, the world's seventh largest telecom operator with a subscriber base of about 159 million, has bought new-generation telecom company Unitech Wireless by paying Rs 6,120 crore for a 60 per cent stake.

The deal puts the enterprise value of the company, which holds a licence for 22 circles and is yet to roll out its services, at Rs 11,620 crore.

The company is promoted by Delhi-based realty group Unitech, which was in the news last week after its share price was hammered down on rumours of payment defaults.

Telenor is estimated to have paid a premium of Rs 50 per share for fresh equity by the telecom company.

The telecom firm will invest Rs 15,000 crore in the next three years and roll out services in 22 circles, for which it has received a licence in phases. In the first phase, it will roll out services in 13 circles, for which it has received spectrum, or the radio frequencies that enable wireless communications, by the middle of next year.

Explaining his decision to give Telenor a majority stake, Sanjay Chandra, chairman of Unitech Wireless, said: "We were open to roping in a minority or majority partner stakeholder, but with Telenor we are in safe hands and we will also need a lot of capital."

Although Chandra said the company received a "fair price" for the value of the licence, the price at which the deal has been struck is lower than a similar deal struck by Etisalat last month. The UAE-promoted firm bought 45 per cent in another new licence holder, Swan Telecom, for Rs 4,050 crore for 13 circles that gives Swan an enterprise value of Rs 10,350 crore.

Also, in June this year the AV Birla group's Idea Cellular [Get Quote] bought BK Modi's 40.8 per cent stake in Spice Communications for Rs 2,700 crore for just two circles with over 4.5 million subscribers.

Unitech, however, paid Rs 1,650 crore as licence fee for the pan-Indian licence, for which it gets a valuation of over Rs 11,000 crore.

Unitech will have three members on the board, including the chairman. Telenor will have four board members, including the managing director.

"We are long-term investors and experts at greenfield operations. So though the market is crowded, there is still large scope for penetration in India," said Sigve Brekke, executive vice-president and head of Telenor (Asia operations).

Telenor has operations in Bangladesh (where it is the largest mobile operator), Pakistan, Malaysia and Thailand. With over 65 million subscribers in Asia, it is the fourth-largest global player in this market after SingTel, NTT DoComo and Vodafone.

Telenor's investment will be in phases, with the first tranche of 25 per cent likely in a month. The entire amount is expected to be in by 2009, Brekke said. The company will raise the money for the deal through a rights issue.

Unitech closed up 1.63 per cent to Rs 49.90 on the Bombay Stock Exchange on Wednesday. On the Oslo Stock Exchange, however, Telenor's shares fell 19 per cent. Rating agency Moody's placed the ratings of the company on review for a possible downgrade.

Unitech Ltd [Get Quote] has so far invested Rs 138 crore as equity in the telecom venture. In addition, Unitech Telecom has borrowed around Rs 2,000 crore from the holding company and from banks (the latter being guaranteed by the real estate company).

Of this, around Rs 550 crore will now be converted into equity shares of Unitech Wireless.

"The conversion of debt into equity will take place after Telenor infuses its entire commitment of Rs 6,120 crore. Until then, Unitech's debt to Unitech Telecom will attract interest," said a senior company executive.

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. Unitech Ltd currently has a debt of over Rs 6,700 crore.

Telenor is also looking at an entry into third generation mobile services, which are yet to be launched in India.

"We are yet to finalise our plans for 3G services in India, though we are looking into it. This deal is based on 2G services and anything beyond that will be an additional cost," Brekke added.