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Sigve Brekke, the Norwegian politician-turned-businessman, has been instrumental in the growth of Norway-based telecom operator Telenor. The executive vice-president of Telenor Group saved the company when it was struggling in Thailand and he came to India when the company was facing trouble in the country amid a price war.
Brekke’s stint in India was not a smooth ride as its pan-India operating permits were once cancelled and there was disagreements with its local partner. The company then changed its partner in India and decided to trim down operations to play a long-term game.
Brekke moved to Bangkok in May this year, to head the company’s operations in all Asian countries, especially to establish business in Myanmar. Brekke, speaks to Surajeet Das Gupta and Sounak Mitra on Telenor’s future plans in India. Edited excerpts:
From pan-India operations, you have decided to trim down to six circles in India. When you came to India, you had big plans and you had a target of 10% marketshare in five year. How did you change the strategy?
For the past 15 years, Telenor has followed a strategy to position itself as a growth company, thus expanding in the growth markets, especially the populated ones. We have invested in these markets and have stayed away from western Europe and America. In the past 15 years, we have developed some competencies on how to deal with the mass markets.
When you have such a strategy, you need to be present in the biggest markets in the world. So, this is one of the reasons why we have invested in India, and did not give up even after the cancellation of licences. Of course, the cancellation of licences was a big surprise for us. But it did not take up long enough to take a decision on should we pack up or stay back. And, we decided to continue and fight it out, just because we had the same belief in the phenomena.
Since then, we have learned a few things. One, if you have this sort of strategy, you need to be very long term, as there would be a lot of ups and downs in growth markets. There would be government changes, price competitions, changes in regulations among others. You need to be able to patiently go through all that if you have a long-term view. We have learnt that in India. It was a setback, but now, we see that an opportunity. So, we are trying to get back to a firm long-term plan.
The second thing we learnt is that India is the most competitive market in the world. And, that has forced us to think very differently in terms of efficiency, cost management, and we have seen how useful is that, even in other markets. The India experience has also helped us build a strategy for Myanmar. The learning we have from India would be helpful for us in new markets like Myanmar. We are also taking some of the people to Myanmar.
We are here in six circles as a platform. These circles cover half of India’s population. All the six circles are going to be profitable by the end of this year (Uninor has announced that three circles have already turned around). This growth gives us a platform for future growth. And, we are very optimistic about the future growth. We are now eagerly waiting for the government’s policy on the mergers and acquisitions (M&A), spectrum pricing and spectrum trading. We will be looking at all of these to take the next step for future growth. We may use all of these or some for future growth. We are ‘very very’ sure that we will be here long term.
How are you positioned in the six circles now in terms of market share?
Our revenue market share in these six circles is between five and eight%, and we are either No 4 or 5 in each operating circle. Our first target is to be among the top four in all the operating circles. We think, if we are among the top four in a circle, we would be able to make money. Our operating model in India is a bit different. We take India not as a country, but as a continent. So, we don’t have to be present pan-India. Even big guys are not successful in all circles. They are successful in a few circles. So, the competition is circle-based, and not pan-India. The cluster-based approach is helpful.
We also target to have 8-10% revenue market share in each operating circle, and we are getting up there. So, our target that way has not changed. We will obviously look at increasing the revenue market share and our ranking in the operating circles. But this is our first target. The circles we operate in have a lower penetration (about 50%) than metro circles. And the customers in India are not very loyal. In a market where customers are loyal, it is very difficult for a new operator to penetrate. That’s definitely an advantage for us.
You have moved from India to Bangkok to look after Telenor’s business in Asia. Would there be any integration?
Every market is different. But we will replicate some of our learnings from India in other Asian markets. The cluster-based approach that has helped us in India would be taken to almost all other Asian markets where we currently operate or would enter. In India, Wipro is our IT (information technology) partner that helped us in managing distribution and customer care (call centre) cost effectively. We have already tied up with Wipro to work with us in all Asian countries, including Myanmar. Wipro will now manage distribution and customer care (call centre) for about 120 million subscribers in Asia. The operating model in Myanmar would be more like a copy of Uninor in India. We never thought India could emerge as the ‘innovation centre’ for us and would be so valuable in terms of learning.
You said you had re-assessed the long-term strategy. How has that changed as far India is concerned?
When we entered the market, we had some clear views on how we’ll develop it. That has changed significantly. We had to make a new plan with market dynamics. The new plan was to first make a platform. Today, Uninor is present in half of India and we are turning profitable soon, which is very different from most of the operators in the country. The issues are being sorted out, and we have new licences. I think, we have a very good position here.
When the auction happened, you decided to trim down operations. What made you take that decision?
We thought the pricing was wrong. That was a conscious decision.
Did you have to change the operating strategy in India, as the market dynamics have changed since you have entered?
Three things have changed. There is less price war with the number of operators coming down in each circle. So, the most aggressive price offers have been taken off. The market has become more rational. Now, we are concentrating in just six circles instead of the nationwide presence. Also, competition in each circle has also come down. And the third thing is that data is picking up, mainly in 2G. And, this is an opportunity for us. The key strategy for us has not really changed, but the way to compete has changed.
How would you compete with the larger players with 3G and 4G services?
The first generation data is picking up, not 3G or 4G. So, I don’t think we have any disadvantage as we have good 2G and Edge network. In the future, there would be requirement for 3G and more. When that happens, we would also look at how to reposition ourselves. But this also depends on the spectrum policy of the government. Currently, we get about 12% of revenue from data, which is close to the incumbents. We are in the mass market and would stick to that.
What is your debt position in the Indian entity?
We are completely debt-free. We took a lot of short-term debt of about Rs 6,000 crore. And that has been paid off by Telenor.
How much do you plan to invest here?
We just received an approval from the FIPB (Foreign Investment Promotion Board) to increase the stake to 74% from 49% now. That will require some fresh investments. (According to its proposal submitted before the FIPB, it would invest about Rs 1,000 crore for this).
Will you go for 100% as the government has allowed 100% FDI in telecom?
There is no immediate plan.
How do you see Myanmar as a market, considering that the country has just about 60 million people?
Myanmar would be most like Bangladesh in terms of average revenue per user (Arpu), which is about Rs 130 . But we target to be the No 1 in that market, and we would be. We can make money there if we can follow the India model in Myanmar properly. The opportunity is very big in India. And the learnings in terms of optimised utilisation of spectrum and efficient distribution and cluster-based operational model would be replicated in the all six markets in Asia — Bangladesh, Pakistan, Thailand, Malaysia, India and Myanmar.
Do you have any plan to offer special roaming plans across Asian countries?
We are currently working on the possibilities to offer special roaming packages to our customers, in which they would get attractive plans, while they roam in any of the countries where we are currently present.
