Telenor ASA investors have a piece of advice for Scandinavia’s biggest phone company: Quit India.
Nine months after its debut in the Indian mobile phone market, Telenor has accumulated 3.4 billion kroner ($556 million) in operating losses. The Norwegian company spent about $1.3 billion to buy control of its India venture and invested 4.8 billion kroner more on capital expenditure. It has forecast the division will be profitable in three years.
“Most investors don’t apply any value to the Indian operations,” said Jesper Kruger, a fund manager at ATP, Denmark’s biggest pension fund, who helps manage 50 billion euros ($64 billion) of assets including Telenor shares. “Quitting India would certainly help sentiment.”
Telenor’s experience in India, the world’s second-largest mobile-phone market after China, mirrors that of Vodafone Group Plc as more than a dozen operators compete for users, pushing call rates to as low as a penny a minute. Telenor may revise its outlook for India at its annual investor meeting on September 21, said Martin Hoff, an analyst at Arctic Securities in Oslo.
“The average revenue per user in India has collapsed in the last two years to a level below Telenor’s expectations,” Hoff said. “The old guidance of break-even in three years looks impossible and I expect they will incur pretty large losses every quarter for the next couple of years.”
Telenor, based in Fornebu, Norway, entered India by buying a stake in Unitech Wireless, an arm of Unitech Ltd, the real estate company controlled by billionaire Ramesh Chandra.
| UNINOR | ||
| 2010 | m NOK* More From This Section | |
| Jan-Mar | Apr-Jun | |
| Revenues | 56 | 103 |
| EBITDA | -974 | -1,132 |
| Op profit | -1,113 | -1,323 |
| Capex | 712 | 364 |
| *1 NOK='7.60 Source: Telenor interim reports | ||
The venture, called Uninor, was designed as a lean operation that could win customers with cheap rates, following Telenor’s successful operations elsewhere in Asia. It strove to keep investment down by leasing tower access from other companies and outsourcing back-office functions.
Telenor, which began accumulating its stake in Uninor in 2009, now owns 67.25 percent of the venture, which it said in February it spent 61.2 billion rupees ($1.3 billion) to acquire from Unitech. Although it can legally own up to 74 percent, it doesn’t intend to raise its stake, Telenor spokesman Glenn Mandelid said.