Telenor's targets profits in 5 years

GENEVA: Norwegian telecom firm Telenor, which is slated to roll out pan-India operations by year-end under the UniNor brand, said the ongoing tariff
war in the country is hardly surprising. It has factored in losses to the tune of Rs 15,000 crore in its first five years of operations.

“It is no surprise that there is a price war in the Indian market. Tariff wars happen when telecom penetration goes up from 30% to over 40%,” said Fredrick Baksaas, president & CEO of the Telenor Group. “We are structuring our operations in such a way that our core earnings — earnings before interest, taxes, depreciation & amortisation (EBITDA) — break even in three years. We are targeting an operating cash flow break-even in about five years from the launch,” he told ET, on the sidelines of the ITU World summit in Geneva.

“India is a large country — it is a continent by itself and we are targeting profits in five years from there. Even in Norway — Telenor’s home market — we took seven years to break even,” he added. Telenor’s operations in India will be through Unitech Wireless, in which it holds a 67.25% stake. In October 2008, Telenor bought 60% in Unitech Wireless for Rs 6,120 crore.

But in March 2009, the cash-strapped realtor agreed to give away an additional 7.25% stake to Telenor at no additional cost in return for not having to pump in more funds into JV for the next two years and higher repayment of debt. Telenor operates in 13 countries and has some 170 million users. As reported earlier by ET, Telenor has reduced its capital expenditure in 2009 by about 30%.

The company will invest Rs 2,500-3,200 crore in India in FY09, against the earlier planned investment of Rs 4,600 crore. The Telenor chief claimed that the mobile network it was rolling out in India was the most economical one compared to its operations in other markets. “The Indian business model is different. This is the cheapest network that we will deploy,” he said. Mr Baksaas added that the telecom company would go all out to make itself visible in the crowded Indian market by offering higher quality of service.

Telenor’s Indian arm has signed deals with tower company Tata-Quippo for sharing its infrastructure. It has also entered an agreement with Indian infotech company Wipro to manage its IT services and has awarded contracts for network equipment in eight telecom circles to Alcatel-Lucent, Huawei and Ericsson and Nokia Siemens Networks.

India currently has seven pan-India mobile operators, with Bharti Airtel being the biggest with over 100 million customers, followed by Reliance Communications (RCOM) and Vodafone Essar. A string of new players like Datacom, Loop, S Tel, Sistema-Shyam and Swan (Etisalat) are also in the process of rolling out pan-India operations.