* Telenor's Indian JV agrees to sell off assets in auction
* Minority shareholder cries foul against Telenor
* Telenor under pressure to settle Indian row (Updates throughout, adds comments by analyst, Unitech)
By Devidutta Tripathy and Balazs Koranyi
NEW DELHI/OSLO, Aug 1 Mobile phone networks operator Telenor moved a step closer to pushing out its joint venture partner in India on Wednesday, with a view to rebuilding the business after the loss of its radio frequency operating licences.
Telenor's joint venture Uninor is among eight mobile carriers in India set to lose a total of 122 regional operating permits in September following a Supreme Court order to revoke and re-auction all licences granted in a scandal-tainted sale four years ago.
But instead of shutting down its service, Uninor said on Wednesday it has agreed to sell off its operations via a separate auction before that date and Telenor is planning to bid, thereby enabling it to extract the core operating entity and paying off one-third owner Unitech, India's third-biggest property developer.
Norway-based Telenor, which owns the remaining two thirds of the Indian joint venture, has blamed Unitech for losing the current operating licences, accusing it of "fraud and misrepresentation", and said it would either leave India or buy out Unitech and take the business into a new entity with a new partner.
However, Unitech has contested Telenor's moves, taking the firm to court, and said Wednesday's move was another breach of Indian laws.
"The proposed auction of Uninor assets is nothing but a circuitous way for Telenor to transfer these assets to another one of its own entities," Unitech said.
"The fact that Uninor, the auctioneer and the only party to have expressed an interest already are all under the direct control of the same management of Telenor only shows that this is not a free and fair process," it said in a statement.
Telenor said Unitech's resistance threatened to destroy the business.
"This (auction) will ensure that the value of Uninor's busines is preserved, and not allowed to be destroyed," Telenor said in a statement.
It added that Unitech's rights "enshrined (in a shareholder agreement) was based on fraud. We are willing to establish this in court".
Uninor said the base bidding price for the business has been set at 40 billion rupees ($719 million) based on a valuation by Deloitte and KPMG, and if there were to be just one bidder the firm would have the right to fix the price at a "fair market value" of 41.9 billion rupees.
The joint venture has about 80 billion rupees of loans from banks.
Analysts said the eventual cost of buying out Unitech will depend on how quickly Telenor can acquire Uninor's business.
If the firm stays in India and the country manages to keep its self-imposed Sept 7 deadline on revoking current licences, Telenor will need a quick solution to ensure customers are switched over in time and their service is not shut down by the government.
The revoked licences will be sold off in a new spectrum auction, now scheduled for September, with details of the new auction due some time in August.
"If the bidding (for the new licences) has to be done by the end of August that puts a lot more stress on Telenor and their bargaining power," Carnegie analyst Espen Torgersen said. "If they are under time pressure and forced to deal with an out of court solution, then it would be more expensive."
Telenor's Indian joint venture has been the most aggressive of newer entrants in the country's giant telecoms market and had more than 45 million customers as of June, or 5 percent of the market of more than 930 million mobile users.
Top players, which include Bharti Airtel, Reliance Communications and Vodafone's Indian unit, were operating well before the 2008 auction and are not losing any of their licences.
However, the Indian authorities appear to be late in preparing for the new spectrum auction and a delay is probable, giving Telenor a bit more time and leeway, Torgersen said.
With just weeks to go before the court's auction deadline, India's government still has not published the full terms of the auction, making it impossible for firms to prepare.
If the price is too high, Telenor would not bid but its recently announced plan to reorganise the Indian unit and Wednesday's agreement to auction off Uninor's assets indicates it is planning to stay in India for the long haul, analysts said. ($1=6.0151 Norwegian crowns) ($1=55.6150 Indian rupees) (Editing by Greg Mahlich)