February 26, 2017
It's an end game for Norwegian telecom operator Telenor in India. Nearly eight years after venturing into India, Telenor has decided to call it quits. On Thursday, Telenor announced its plans to sell its entire operations in India to Bharti Airtel for an undisclosed amount.
February 26, 2017
It's an end game for Norwegian telecom operator Telenor in India. Nearly eight years after venturing into India, Telenor has decided to call it quits. On Thursday, Telenor announced its plans to sell its entire operations in India to Bharti Airtel for an undisclosed amount.
The journey of Telenor in India is rather tumultuous. Like many other global telecom majors – Vodafone, MTS, and DoCoMo – Telenor was lured by the vast potentiality offered by India.
As Telenor exits India lock, stock and barrel, it's time to understand what went wrong. To begin with, Telenor's entry into India was ill-timed. Back in 2008, the government opened the gates of telecom sector allowing various players to set up shops, including a lot of non-serious entities. The telecom ministry issued 122 telecom licences to some 22 entities on a first-come, first-served basis at the 2001 prices. Real estate firm Unitech, through its subsidiaries, acquired spectrum in all 22 telecom circles.
Telenor joined hands with Unitech to form joint venture – Unitech Wireless (with a brand name Uninor). By the end of 2009, Uninor rolled out services in seven circles targeting the young population. In less than two years, its subscriber base swelled upto 30 million in 13 circles. By that time, Telenor had invested substantial amount in the Indian arm taking its total ownership to 67.25 per cent in the JV.
Even as the JV was growing fast, Telenor was taken aback when in 2012 when the Supreme Court quashed 122 licenses issued in the 2008 process, including Uninor's 22 licences. It was a turning point as the apex court's order dislodged non-serious players from the sector. Despite a major setback, Telenor decided to continue its India journey.
The reason to stick to India was largely driven by the fact that other markets were not growing as fast, and the its key executive Sigve Brekke had a past experience of turning around the floundering Thailand business.
Uninor started its second innings with a much downsized operations – services in just six circles. It had lost about 10 million customers, including subscribers in key markets such as Mumbai and Kolkata. Around the same time, Telenor was fighting legal battle with its ally Unitech over partnership issues. Unitech exited the JV in 2012 leading to Telenor acquiring 100 per cent stake in the company.
After dealing with legal battles and regulatory uncertainties, the new management decided to sharpen its focus. In order to make up for the lost opportunities, Telenor went after customers which it thought were neglected by the market leaders — Airtel, Vodafone and Idea Cellular. Telenor primarily targeted low-value prepaid customers who wanted voice, SMS and basic value-added services. It also moved out of high-margin postpaid schemes, and kept a close watch on costs. The target was to serve mass market where margins may be lower but the volumes are high.
But the sector was moving away from voice services. The SMS segment was losing its battle to messaging apps whereas voice market was getting commoditized. From 2011 onwards when 3G services were launched by major carriers, it was not able to see the writing on the wall. The future of telecom is data. Telenor didn't sense the data opportunity and stuck to 2G technology even though it had liberalized spectrum in 1800 MHz, the ideal band to launch 4G services.
The launch of 4G in 2015 made it clear that fringe players like Telenor has no place in the Indian market because rolling out data networks is a costly business. Telenor, on the other hand, is constantly struggling with financial performance. For instance, its total impairment loss and write downs were Rs 5,825 crore during the nine months of 2016. Previously, in 2012, it had written off Rs 3,500 crore India assets.
Besides getting mired in the regulatory cobweb, Telenor India's case also highlights that even serious players are unable to realise their folly and see which way the wind is blowing.
Courtesy: India Today
