Telenor to break even in its core six circles by end 2013

It will not be making fresh capital investments in India and instead will use the infrastructure which is being dismantled in circles where it lost licenses in the remaining six circles.

Sindhu Bhattacharya November 30, 2012 08:40:20 IST
 Telenor to break even in its core six circles by end 2013

New Delhi: Telenor today announced EBIDTA breakeven in the Uttar Pradesh (East) circle,saying its operations there have achieved the 18 paise per minute cost structure which is in line with competitors.

This is the fastest break-even by any mobile operator in any circle in India, the company claimed.

Telenor has had a bumpy ride in India, to say the least. The Norwegian company has seen it all - financial irregularities through estranged joint venture partner Unitech, loss of 13 licenses after the Supreme Court cancelled 122 licences awarded by former telecom minister A Raja, inability to win back all the circles it lost in the just-concluded 2G auctions because of exorbitant reserve price of spectrum.

 Telenor to break even in its core six circles by end 2013

Telenor today announced EBIDTA breakeven in the Uttar Pradesh (East) circle, saying its operations there have achieved the 18 paise per minute cost structure Reuters

So the announcement of a breakeven in even one circle is welcome news since this would mean a little less uncertainty for the telecom sector as a whole.

At the time of achieving break-even, Uninor in UP (East) serves over 7.2 million customers. Jon Fredrik Baksaas, President and CEO of the Telenor Group also made it clear today that his company, wiser after the Indian roller coaster, will now stick to providing "basic" telecom services in the six circles it has retained.

It will not be making fresh capital investments in India and instead will use the infrastructure which is being dismantled in circles where it lost licenses in the remaining six circles.

But Telenor is expected to remain a headache for competition since it will continue emphasis on remaining in the low tariff bracket.

"As a challenger in the market place, we will continue to be on low side of tariffs. In fact,

the low tariff environment in Indian telecom sector is not over yet," he said.

So all those analysts who have been predicting more market and revenue share for bigger incumbent telcos because of Telenor vacating some circles may have to do a rethink.

Telenor is scaling down operations in seven circles after it failed to win back spectrum in these areas but has brought forward its overall cash breakeven in six operational circles by 12 months to the end of 2013.

Baksaas refused to comment on persistent speculation about his company merging operations with Tata Teleservices. He also did not divulge whether Telenor will participate in any fresh auctions - the Government has been in two minds about a second auction for at least four circles of Delhi, Mumbai, Karnataka and Rajasthan at a lower reserve price.

Telenor's decision on this matter would be key to its long term strategy since it lost license in the lucrative Mumbai circle after the SC judgement and has been unable to win it back in the recent auctions.

According to revenue generation capabilities, Mumbai is the fifth most lucrative in 22 telecom circles in the country.

In reply to a question on payout for the just-concluded auctions, Baksaas said his company would avail of the staggered payment option and even here, it would look to offset the license fee paid earlier against the upfront payment to be made to the Government. As per DoT, the company has to shell out Rs 1326.03 crore as upfront payment for winning spectrum in six circles. The company has also made it clear that all the 400 employees on its rolls in the circles where operations are to be shut down will not be accommodated and some will have to leave.

Telenor Group has secured 5 MHz spectrum UP East, UP West, Bihar, Andhra Pradesh, Gujarat and Maharashtra in the recently concluded auctions. This allows Uninor operations to continue seamlessly in the new company for a period of 20 years. Together, these six circles account for over half of India's population.

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