Telenor lost Rs 8,000 cr in India in three years, why is it not

• Posted by Sindhuri G August 30, 2012 - Filed in Business - 2,008 views

  For the last six months, SigveBrekke has been an itinerant traveller. The Asia head of Telenor has been traversing the length and breadth of India to the 60 offices of its Indian arm to meet its 17,500 employees and, on many an occasion, even their families.

  In these interactions, the message from the Norwegian, while characteristically candid, is uniquely paradoxical: expect the best, but be prepared for the worst.
  
  For Telenor, the best would be Uninor—its Indian joint venture in which it owns 67.25% and whose very existence is under question—has a new lease of life. Worst would be it is unable to resolve the two central issues facing it—new policy rules and a hostile partner in Unitechwith acceptable damage, and has to kill Uninor.
  
  "Telenor Group's future ambition is to continue," says Brekke. It's an ambition that is shaped as much by a pressing need to have a large growth market like India in its portfolio as from a want to salvage a business in which it has sunk in about Rs 16,000 crore in about three years. Telenor needs India badly.
  
  

  

  The Norwegian multinational, which has seen its revenue growth flag from 12% in 2007 to 7% in 2011, needs growth engines. And, in its current portfolio of 11 countries, there is no market with as many subscribers or as endowed with incremental revenue possibilities as India.
  
  In the April to June quarter of 2012, Telenor's revenues from its top four markets (Norway, Thailand, Malaysia and Sweden) were 2.5-6.1 times that from India.
  
  But while year-on-year growth in revenues from these markets ranged between 0.6% and 14.5%, its Indian revenues rose 64% (See graphic: The Need...).
  
  Uninor's proposition to subscribers has been low price and no frills. As of June, it had 45.5 million subscribers, according to the Telecom Regulatory Authority of India (TRAI).
  
  In fact, of the six new companies that bagged licences during the controversial 2008 allocations—which has have since become a graft case involving ministers, bureaucrats and companies—only Uninor has set up substantial operations.
  
  These operations, however, are now threatened on two fronts that are playing out simultaneously.
  
  On the one hand is a policy change that effectively sets new terms for the 2008 licences and will require Telenor to invest a multiple of its initial projection.
  
  On the other hand is a reluctant partner in Unitechfrom whom Telenor bought the rights to those licences—that is prone to hurling legal volleys at the Norwegian company.
  
  The question is how much is Telenor willing to put up with, on both fronts, to swim out of the morass of legalities it has become a party to.
  
  "The best course of action for it would be either to exit or acquire any economically viable players in India," Suresh Mahadevan, UBS analyst, said in a note earlier this month.
  
  "Not for a moment have any of these challenges made us feel like walking away," says Brekke. "Yes, there could be a situation that we are forced to do that, but it won't be because of any of these issues. These are bumps in the road." In his references to Asian markets, Brekke constantly uses the phrase "long term".
  
  It's a subtle statement that regulation in these markets is, at times, not as smooth as companies would like it to be, but that's a shortterm price to pay for long-term benefits. Yet, Brekke admits there is a breaking point.
  
  "At the same time, no responsible business can 'hang in there' regardless of any situation," he says. "After all, you are accountable to your shareholders for the money you invest."
  
  After about two years of a barrage of hostilities and uncertainty, Telenor is approaching its moment of reckoning, one way or the other.
  
  Managing Employee Layoffs
  
  Waiting on tenterhooks are about 17,500 Uninor employees. Since February, when the country's apex court cancelled the 2008 licence allotments and asked the government to redo the process, Brekke, who is based in Bangkok, has been reaching out to his Indian staff with greater frequency.
  
  If he was earlier flying across to India once a week, Brekke has since spent an average of 24 days a month in India. In this period, he has done two 'roadshows', as part of which he spent at least four days at each of the 13 circles.