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UPDATE 2-Telenor sets new India venture after divorce from Unitech

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(Recasts, adds Telenor comment, detail)

* Telenor still needs local partner for new business * Spectrum auction set for November for new licences * Telenor has not yet decided to participate in new auction * Unitech-Telenor JV caught in controversial court case By Devidutta Tripathy and Victoria Klesty

NEW DELHI/OSLO, Oct 11 (Reuters) - Norwegian telecoms groupTelenor has dissolved a joint venture with India'sUnitech Ltd , hoping to distance itself from a scandalover the award of operating licences and setting out a new planto win business in the subcontinent.

Telenor said on Thursday it would set up a new entitythrough which it could bid for operating licenses, after courtscancelled 122 regional operating permits held by eight carriers- including the Telenor/Unitech venture - granted in ascandal-tainted licensing round in 2008.

The move could make it easier for Telenor to continue doingbusiness in India, although it still has decide whether to spendthe billions of crowns required to buy back the lost licenses.

"Telenor is preparing to participate in the upcoming 2Gspectrum auction through this new entity, but will take a finaldecision on whether to participate at a later date," the companysaid.

The 2008 corruption scandal in which lucrative mobile phonepermits were sold at below-market price led to the resignationof two Indian ministers having cost the exchequer as much as $36billion in lost revenue.

Telenor, which owned two thirds of the Uninor-brandedventure with Unitech, had blamed the Indian company for thelicence cancellation.

Unitech initially opposed the ending of the venture and hadsaid it had veto rights to block any transfer of its assets, buthas now agreed to sell its share of the venture for a nominalsum to the Norwegian group.

Telenor, which had threatened to exit India, has had towrite down 8.1 billion crowns ($1.4 billion) worth of Indianassets as a consequence of losing the licences.

It has said it is in talks with several potential newpartners in India and has given itself an Oct. 18 deadline todecide whether to participate in the upcoming state auction, setto start next month.

The new licensing round could be costly for Telenor andrisks pushing it above a self-imposed investment cap, which ithas repeatedly said it would not breach.

Telenor will have to sign a new local partner as Indianrules allow a maximum 74 percent shareholding by foreigncompanies in telecom carriers.

Shares in Unitech rose 13 percent after news of thesettlement.

"Subsequent to a successful business transfer and spectrumauction, all disputes and claims between the parties shall standwithdrawn/concluded," Unitech said.

($1 = 5.7367 Norwegian crowns)

(Editing by David Holmes)

((victoria.klesty@thomsonreuters.com)(+47 2293 6979)(ReutersMessaging: victoria.klesty.thomsonreuters.com@reuters.net))

Keywords: TELENOR UNITECH/