The Telenor group had reported total India revenues of NOK 1.18 billion (around Rs 974.5 crore) for the quarter ended December 31st 2014, up 29.5% year on year. In October last year, Telenor had increased its stake in Uninor to 100%, and appointed Vivek Sood as the CEO of Uninor. The company is participating in the spectrum auctions in India.
Sigve Brekke, EVP and Head of Region for Asia, Telenor Group spoke with MediaNama yesterday at the Mobile World Congress on the auctions, how it intends to expand its mass market strategy to include data, his views on Net Neutrality in India (in light of the Norwegian regulator speaking against Zero rating), and how spectrum auctions can be open and transparent, and still not expensive.
MediaNama: Which spectrum bands are you interested in?
Brekke: The auction starts tomorrow morning at 9am India time, so I can’t tell you that. There’s no way I can announce our strategy as of now. I can just confirm that we are participating in the auction, and that is another sign of us being in the long term in India. We have so far taken a mass market position, and an affordable position, which is why we call it ‘Sabse Sasta’. When the demand from the mass market changes, we have to change. So far it has been about voice and SMS, and now it’s about data. This means that we also have to make sure that we offer data services.
MediaNama: You’d earlier restricted yourself to a few circles, with the objective of becoming EBITDA positive…
Brekke: We are EBITDA positive in 6 circles, and that was the target. In these 6 circles, which is the Hindi belt and the Western part, we are moving up to be number 4 in the circles, in terms of revenue market share. We have always said that if we can move up to number four and then hopefully number three later in the game, we will have scale enough to make both money and also create the market position and the brand.
MediaNama: Are you looking to expand the number of circles that you’re present in?
Brekke: Yes and no. One learning we have from India is that we don’t look at it as a country any more, we look at it as a continent, because each one of the circles is so big. We want to build scale in the circles. We had also taken a long term view, and are open for M&A opportunities, and other ways of going into other parts where we are not present. We’ll take it step by step.
MediaNama: What sort of data connectivity do you have in the circles that you are present it? In terms of market coverage..
Brekke: Currently with only 2G spectrum, around 23% or 24% of our customers are using data. The communication services that they’re using are Facebook, Whatsapp, and those kind of services. We don’t require 3G or 4G bandwidth to do that. Even with this mass market, we see that data is picking up quickly. However, you need larger bandwidth if you want to offer videos and those type of services. We think that the data demand in India is going to explode. Most of the incumbents are focusing on the metros and cities. We are focusing on the mass market. Our aim is to be “Sabse Sasta” on data as well, as we have been on voice.
MediaNama: You’ve launched separate packs for separate types of services. At the same time, in November, the Norwegian regulator had taken a strong stand on net neutrality, and Zero Rating. What’s your take on the Net Neutrality situation in India, given that, as a company that is largely owned by the Norwegian government, and where the Norwegian regulator has taken a stand?
Brekke: First of all, there is nothing between the Norwegian regulator and Telenor. Our stand on network neutrality is that at the end of day, we also need to get a chance to get a return on our money. We, as in the operators, are the ones that are investing in the network and distribution, and taking the costs of bringing all these millions of customers on board. To do that, we also need to have a chance to monetize on that. That is why we need to be able to price the services, as we are doing on voice calls and SMS, so we are doing on data.
So, what we have done in India is tried to introduce two concepts: one is a time based principle, of charging by the hour, and the other one is the content based. For Uninor, we are breaking this down into hourly pricing, where you can pay and get data access for one hour. The other is the time based, where you can pay for a day or for a week. We have done the same on different content. If you are only interested in Whatsapp or Facebook, then you’re paying for access only to those services. We think that this is necessary if you want data to fly in the mass market. Because the mass market is not about post-paid or monthly contracts or bundling. They are in a cash driven economy where they use their money for today, not saving for tomorrow. That’s why our pricing principles also need to be suited to that type of customer behavior.
MediaNama: Where do you stand on the interconnection charges for OTT (Internet services)?
Brekke: Lets take it step by step. First they reduced the interconnection charges for SMS a couple of years ago, and then they’ve implemented interconnection for voice calls. We are very happy that they actually did this. This was the last thing that needed to be in place to call the Indian market free and fair for competition. We have argued all along that you need to have interconnect charges based on actual cost of terminating. As of now we are happy that it has happened on voice, and lets see what happens in the future on more content.
MediaNama: Again, on OTT (Internet services) and Interconnection charges, where do you stand on that?
Brekke: Naah, we don’t have a stand on that.
MediaNama: Because of the 2G scam, it appears that auctions in India are a given, because of the lack of transparency in allocation. At the same time, auctions become so expensive that for businesses to be viable, the cost to consumer increases. Is there another way of doing this that is open, transparent and still not as expensive?
Brekke: The answer to that is yes. The easiest way of doing this is auction. If I look in Asia, Malaysia did not have a spectrum auction. Myanmar had accommodation: they had 1500 points. You had to make your business plan, and you got points for who has the lowest price, the largest network rollout, the biggest product map, for which you could get 1000 points. The remaining 500 points was about who’s putting the most money. So you could neither win with promising a lot, nor win with having the highest compensation. So yes, there are ways of doing that. Another way of doing this is to set a lower reserve price or lower license fees. But you’re right, the only thing that the government is thinking about is maximising proceeds from the auctions, at the end of the day you (the consumer) are paying for it.