Telenor India will not be participating in the upcoming 2016 Indian spectrum auctions because it believes (quarterly results pdf) that the proposed spectrum prices do not give “an acceptable level of return.” A Telenor spokesperson told MediaNama that its India unit needs more spectrum to be able to maintain and develop a healthy business in the future, but the prices for spectrum “were too high” to maintain an adequate return on investment.
Last month, the cabinet approved telecom spectrum auctions in the 700MHz, 800MHz, 900MHz 1,800MHz, 2,100MHz, 2,300 MHz and 2,500 MHz bands, which could fetch the government and estimated Rs 5.6 lakh crore. Pricing for spectrum was fixed as per TRAI’s recommended reserve prices of Rs 11,485 crore per MHz for pan India airwaves, including the 700 MHz spectrum, which is being auctioned for the first time.
The decision comes even after Telenor had a reported a slightly better financial results during this quarter (Q2 2016). It had reported total India revenue of 1.551 billion Norwegian Krone (NOK) (~$181.9 million) for Q2 2016, a 13% increase from NOK 1.362 billion in the same quarter last year. While its operating loss in India stood at NOK 132 million (~$15.4 million) in this quarter, which reduced from NOK 3232 million in the previous quarter (Q1 2016).
Operations in India will continue: However, Telenor said it will continue to operate in India: “We will continue our efforts to meet customer demands and grow the business based on the current spectrum holding. As we evaluate our options in India, we will be disciplined on capex”.
“It was after thorough consideration we decided not to participate in the upcoming spectrum auction…In the meantime, Telenor India continues its strong subscriber and revenue growth on our current spectrum holding, and we are satisfied with the significant operational and financial improvements from our Indian operation. Until a viable solution is in place, we will strive to deliver equally good results in a challenging but invigorating market situation,” added the spokesperson.
Long term operation is doubtful
The spokesperson did not comment on whether Telenor India might be looking for an exit in the future, but in April, the company had hinted on suspending operations in India if the upcoming spectrum auctions turned out to be costlier, especially at time when it posted a huge loss during its earlier first quarter (Q1 2016) financial results.
In May the company criticized the telecom commission’s approval of base price for the crucial 700 MHz spectrum, and its decision to hike upfront payments to 50% from the earlier 10% proposed by the TRAI for both 700MHz and 800 MHz band. At that time, a spokesperson from Telenor India told MediaNama that the Telecom Commission’s decision to hike initial payment amount “comes as a surprise to the telecom operators as this increase was not discussed during the consultation process with the regulator.”
An ET report suggested that Telenor India could be in talks with Vodafone for selling its India unit, to which the spokesperson said: “To your question about alleged talks, Telenor never comments on rumors and speculations.”
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