The Indian government's cancellation of 2G telecom licences has led to a court case between Norway's Telenor and India's Unitech group, the latest in a series of legal actions resulting from the 2G sale scandal. In its petition, Unitech wants the courts to restrict Telenor from forming a new joint venture in India. The company has also sought to prevent Telenor from transferring assets from their existing joint venture, Uninor, to a new unit. Chartered accountant Manish Sampat said that while returns in the telecom industry are not high as five to 10 years ago, Telenor would be looking to stay in the Indian market.

"Telenor is a long-term investor. They are looking at a growth story, they are looking at a consumer story in India. Therefore they would like to continue their business association in India," the analyst said.

Telenor is also seeking compensation from the Indian government for losses caused by the cancellation of its telecom licences.

Telenor, which owns the stake in the Indian joint venture through its unit registered in Singapore, has also threatened to invoke the provisions of the Comprehensive Economic Cooperation Agreement or CECA between India and Singapore.

Analysts believe the row could hamper India's image as a foreign investment hub.

"The question is whether we want to brand our country as a corrupt nation," Sampat said. "And the answer to that definitely is 'no'.

"We do not want people to think that they have to live with corruption, corrupt politicians and the flip-flop policies of the government to get return on investments in India. So we would need to change that to attract more investments into India," Sampat added.

In February, India's Supreme Court cancelled 122 telecom licences that were awarded to private telecom operators in 2008.

The court ruled that the licences had been awarded at below market rate.

Telenor's Indian unit is one of several firms set to lose their operating permits.

- CNA/wm-