Fi­nally, Te­lenor may Call Off In­dia Fight

With no 3G or 4G ser­vices, lit­tle data spec­trum & lim­ited pres­ence, Nor­we­gian telco may sell In­dia biz; seeks $1.6-1.8 b val­u­a­tion

The Economic Times - - Front Page - Anan­dita.Manko­tia @times­ 2.5 lakh 2.9 mil­lion 2 mil­lion 1.5 mil­lion

New Delhi: Te­lenor may be look­ing to exit its In­dia telecom busi­ness but hasn’t been able to find a buyer so far. The Nor­we­gian telco has been pushed into a cor­ner, with no 3G or 4G ser­vices, hav­ing lim­ited data spec­trum and be­ing con­fined to a few pock­ets as ri­vals have be­come stronger and Re­liance Jio In­fo­comm pre­pares to launch oper­a­tions. The com­pany, which has spec­trum in seven cir­cles but op­er­ates in just six of In­dia’s 22 zones with air­waves only in 1800 Mhz band, is said to be look­ing for a val­u­a­tion be­tween $1.6 bil­lion and $1.8 bil­lion (.`11,000-12,000 crore), two peo­ple fa­mil­iar with the mat­ter said. But ex­perts say it may at best be able to get around $1 bil­lion (.`6,800 crore), with spec­trum be­ing the main saleable asset.

When the Go­ing Gets Tough...

Co op­er­ates in just six of In­dia’s 22 cir­cles with air­waves only in the 1800 Mhz band TE­LENOR IN­DIA ADDED

users in Fe­bru­ary vs

for Air­tel,


for Voda­fone and

for Idea

A Te­lenor spokesper­son de­clined to com­ment.

The com­pany's In­dia ex­pe­ri­ence has been fraught with dis­ap­point­ment, given that it has in­vested over $3 bil­lion since 200809 in try­ing to build a busi­ness in the coun­try, now the world’s fastest-grow­ing mo­bile phone mar­ket. Af­ter los­ing all its In­dia li­cences in 2012, Te­lenor sought to fight back but hasn’t been able to make much head­way.

In Fe­bru­ary, af­ter post­ing a wider on-year op­er­at­ing loss for the quar­ter to De­cem­ber, due mainly to com­pet­i­tive pres­sures and higher capex on net­work mod­erni­sa­tion, the Nor­we­gian par­ent ad­mit­ted that the fu­ture of its In­dian unit de­pended on get­ting more spec­trum, through trad­ing or via auc­tions. But it hasn’t suc­ceeded in this. In the mean­time, the com­pany has just de­ployed a tech­nol­ogy that al­lows of­fer­ing LTE mo­bile broad­band on a nar­row band of spec­trum in Varanasi, which the com­pany plans to ex­pand to the six cir­cles men­tioned above by the year end. But an­a­lysts are scep­ti­cal about the tech­nol­ogy, while point­ing out that the com­pany is any­way too late into the data mar­ket.

Tra­di­tion­ally, LTE is de­ployed over a min­i­mum 5 MHz of con­tigu­ous spec­trum.

The telco faces sev­eral key chal­lenges.

“They haven’t been able to cut any trad­ing deal so far, and most of what­ever (spec­trum) was on sale in the mar­ket, has been sold to larger play­ers,” said one of those cited above. “It will be dif­fi­cult for them to com­pete in the auc­tions with deep-pock­eted ri­vals. They have run out of op­tions in In­dia.”

Te­lenor's chal­lenges re­late to the value of its spec­trum and its cus­tomer base. Con­sid­er­ing its resid­ual life, the fre­quen­cies are pegged at less than .₹ 4,000 crore. Its 50 mil­lion cus­tomers in UP West, UP East, Bi­har, Gu­jarat, Ma­ha­rash­tra and Andhra Pra- desh gen­er­ate low av­er­age rev­enue per user (ARPU), given the telco’s stress on be­ing a ‘sabse sasta’ player.

“More­over, the po­ten­tial buy­ers al­ready have ad­e­quate air­waves in those cir­cles,” one of the peo­ple said.

Te­lenor, which en­tered In­dia in 2008 by buy­ing into pan-In­dia spec­trum and per­mit holder Unitech, suf­fered a big set­back when the Supreme Court an­nulled its li­cences among the 122 that it can­celled as part of what is known as the 2G scam. But Te­lenor, then called Uni­nor, ac­quired band­width in six cir­cles, and sub­se­quently, bought out its In­dian part­ner when the rules al­lowed, mak­ing clear its in­tent of be­com­ing a se­ri­ous con­tender in the In­dian mar­ket.

But ex­perts said its re­luc­tance to buy 3G or more 4G spec­trum be­yond a cer­tain price with an eye to­ward prof­itabil­ity meant that af­ter eight years, it is still a rel­a­tively small re­gional player with its 2G-only oper­a­tions hav­ing just over 5% of sub­scriber share and much lesser rev­enue mar­ket share. This, at a time when the top three — Bharti Air­tel, Voda­fone In­dia and Idea Cel­lu­lar — have beefed up their data band­width holdings, ex­panded 3G and launched 4G ser­vices to take on Jio, which is ex­pected to launch high-speed broad­band ser­vices later this year. That has set the stage for a fierce battle for high­pay­ing data cus­tomers among pan-In­dia car­ri­ers.

More­over, rel­a­tively weaker tel­cos Sis­tema Shyam Te­le­ser­vices and Air­cel are in var­i­ous stages of com­bin­ing busi­nesses with Re­liance Com­mu­ni­ca­tions, form­ing a stronger com­peti­tor.

“4G is chang­ing the rules of the game – it is lead­ing to dis­rup­tion, which is ac­cel­er­at­ing con­sol­i­da­tion. It will be­come in­creas­ingly dif­fi­cult for re­gional play­ers to sur­vive un­til they be­come a pan-In­dia player,” said He­mant Joshi, part­ner at Deloitte Hask­ins & Sells LLP.

Te­lenor's low-price strat­egy, which ini­tially helped it get sub­scribers and rev­enue, has suf­fered with big­ger ri­vals play­ing the same game, an­a­lysts said.

As a re­sult, Te­lenor In­dia, which was adding over a mil­lion sub­scribers a month in mid-2014, added just 250,000 sub­scribers in Fe­bru­ary, com­pared with 2.9 mil­lion for Air­tel, over 2 mil­lion for Voda­fone and 1.5 mil­lion for Idea.

Aside from its telecom busi­ness, Te­lenor In­dia re­cently re­ceived a pay­ments bank li­cence un­der a three-way part­ner­ship. The com­pany owns a 39% stake with Dilip Shanghvi of Sun Phar­ma­ceu­ti­cal In­dus­tries hold­ing 41% and IDFC 20%. Pay­ments banks are al­lowed to of­fer ba­sic banking ser­vices.


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