Telenor facing legal claims for more than £140 million

Telenor, a member of Newtel Group which has mounted a hostile bid for Esat Telecom Group, is facing claims for more than £140 million from five different litigants. The company has rejected all five claims.

Telenor, which merged with Telia to form Newtel, has mounted a $1.59 billion (£120 billion) bid for Esat Telecom. The bid has been rejected by Esat. Telenor and Esat Telecom each hold a 49.5 per cent stake in Esat Digifone. Details of the claims are contained in the offer document which was posted out to shareholders at the weekend. The largest single claim facing Telenor is from a Cypriot company which is seeking damages of up to 920 million Norwegian kroner (£89.3 million). The company, S&A Telecom Cyprius Ltd, is a coowner with Telenor Invest (a Telenor subsidiary) in a company in Greece.

The grounds for the S&A writ is a claim that Telenor Invest has breached the provision in the shareholder agreement between the parties in connection with Telenor Invest's acquisition of 30 per cent of the shares in the Greek mobile telephone company Cosmote A.E.

Telenor says it is challenging the amount for the claim and the grounds for it. "At the present time, after a preliminary assessment, there are no grounds for making any provision in the accounts," according to Telenor.

The second biggest claim is for $34 million, arising from a paging project in Russia. Five associated Telenor companies and three private citizens are being sued by three American citizens, on Russian citizen, one US company and one Cayman Islands company. The $34 million claim is for breach of contract and negligent behaviour.

Telenor says it refutes the claim and will recommend that the US court of Justice rejects it. Another US company, ITS LLC, sued Telenor last year, seeking up to $18 million, of which $10 million relates to alleged loss of income.

Last year, Telenor Net, a Telenor company, was sued by Netcom. It is claiming that Telenor should repay 92 million Norwegian krone (£8.9 million), plus interest and arrears.

Netcom claims that it paid excess fees of approximately 97 million krone from 1993-1996, regarding leased networks. Telenor says it refutes the claim and has made no provision for it.

Another company, called Teletopia, sued Telenor in 1997 with a claim that the agreement from 1995 between the companies should still be valid and that Telenor shall supply Teletopia with a a large number of telecommunications connections.

It says Telenor should be ordered to pay damages of up to 45 million krone. Teletopia has also reserved the right to increase the claim for damages. Telenor says that it also refutes this claim and has not made any provisions for possible costs. The telecommunications sector is an extremely litigious one. The Newtel group's combined sales for 1998 were $9.5 billion, so settling such claims, if found to be valid, would not cause major financial problems. Telenor itself, made operating profits of 2,875 million krone, or £279 million, for the third quarter of 1999.

The offer document also says that Newtel does not currently plan to dispose of a "material amount" of Esat's assets following the Offer. It has been widely speculated that Newtel, if successful, will dispose of Esat's fixed line business.

Meanwhile, a spokesman for Credit Suisse First Boston (CSFB) said yesterday that he could not comment on a report that CFSB analysts believed $95 was a fair price for the Esat stock. CFSB is leading the Esat defence. Esat has until December 17th to announce its defence - detailing why shareholders should reject the $72 offer per share. Already the shares have risen well beyond that to around $79.8 on Friday.

It is now a certain that Newtel will have to improve its offer.