OSLO, Jan 27 – Norwegian telecom operator Telenor on Tuesday dropped a controversial share issue worth 12 billion kroner (1.4 billion euros, 1.8 billion dollars) to finance its purchase of India\’s Unitech Wireless.
"Telenor has decided to fund its investment in Unitech Wireless in India through a combination of cash flow and issuance of additional debt," the company said, adding that it had signed an eight-billion-kroner three-year loan that might be used to fund the investment.
"As a result of this, Telenor withdraws the previously proposed rights issue of 12 billion kroner," it said.
Telenor had consequently "decided to propose that there will be no payment of dividend to shareholders for 2008," it added.
The company also said it intended to propose that no dividend be paid for 2009 as well but would make its final decision early next year.
Telenor\’s announcement at the end of October that it planned a share issue in the first quarter of this year to buy a 60-percent stake in the small Indian start-up Unitech Wireless was met with scepticism by investors who feared the move was risky in light of current dire market conditions.
Unitech Wireless employs around 250 people and holds licenses to operate in every region of India but is expected to need to invest heavily before it can begin operating by the middle of 2009.
Following the October announcement, Telenor saw its stock price plummet 26 percent in a single day of trading and the share has remained weighed down by the prospect of the rights issue.
The market reaction was far more positive Tuesday, sending the company\’s share price soaring 7.53 percent in early trading on the Oslo stock market, which was up 1.17 percent.