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Telenor Talks About Indian Operations, Future Plans

Norway headquartered telecom company, Telenor, conducted a briefing on the present situation of its Indian operations, and its future outlook. Remember that the company had won spectrum in 6 circles during the recently conducted 2G auctions, after its license was cancelled by the Indian Supreme Court in February 2012. The company declared that it will now focus on the six new circles, keeping in consideration its funding limit of Rs 155 billion, and that it aims to break-even with respect to cash flow towards the end of 2013. Some more notes from the briefing:

– The company had adopted a ‘circle by circle’ approach, securing spectrum in its six best-performing circles. The company estimates the total population in these circles to be 600 million, with a penetration rate of 40%. It talked about the UP East circle where it has been able to breakeven in a time span of 3 years with 7.3 million subscribers and cost per minute of 15 paise, was at number 5 position, market share wise. It expects to breakeven in Maharashtra and Gujarat in early 2013. It experienced a revenue growth of 6% in 6 circles and 8% pan-India.

– Telenor had participated in the auction with its new partner Lakshdeep Investments which has a 26% stake in the new Joint Venture. Telenor has a 49% stake and is awaiting FIPB approval for expanding its holding to 74%. It talked about market concentration being lower with 3 big guys only getting 70% market share, while in other markets it’s much more. So there was scope for new players to capture the remaining part. India being a price sensitive market, there’s no customer loyalty and churn is high even for incumbents.

– Telenor said that it will continue to focus on voice and that data was still not contributing to growth. It informed that only 10% of its revenue was coming from data, and this trend is likely to continue for a few years. The company also does not offer postpaid connections. While incumbents were raising prices, telcos were still offering significant amount of free minutes. However, more transparent and stricter SIM card activation process will check free minutes and reduce agents’ commissions, the company executives said.

– The company’s India CEO Sigve Brekke said that he felt that it was not necessary to have a Pan-India presence, and that India is more like a continent than a country. Telenor will target 20% marketshare in each circle and then move to a new geography, he added. He said that the government needs to clarify how spectrum is consolidated after M&As, with the New Telecom Policy ready to be in place. He also said that he did not understand Videocon’s stand of using newly acquired 2G spectrum for 4G data.

– Brekke called for reducing the call termination charges to zero and implementation of one nation-one rate. He also called for clarity on spectrum sharing and trading, and how that can help the company in carrying more traffic with less bandwidth.

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– He also explained how Telenor was collecting data and leveraging it to achieve spectral efficiency and utilization. So its network was able to carry more traffic compared to other operators with the same bandwidth. He also talked about adopting a cluster approach since 80% of traffic stayed within a cluster, and improving profitability by shifting network infrastructure in clusters recording more traffic. It also intends to cut costs by not setting up its own towers and sharing them.

– The company’s prepaid ARPU was 30%-40% lower than the industry and it plans to narrow that gap. However, its cost per minute was below incumbents.

– He informed that Telenor was interacting with end-users through 350,000 outlets recording 8 million interactions in a day.

– On auctions: He said that the company would not be able to comment on the new 2G auctions till the government comes out with guidelines but it feels that the discount given on the present base price should be more than 30%. It also said that it would only be able to comment on its operations in Mumbai in January when it gets to know about the continuity of its license.

– It also informed that it has not got a refund of its license fee, and although the spectrum that it secured in the new auctions were under the name of a new entity, Telewings, it said that it was the majority share holder in Uninor during the last auction, so it would be eligible for a refund.

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