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
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 Vodafone and
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.