New Delhi: A day after Norway’s Telenor ASA, the world’s seventh-largest phone firm by customers, said it would buy up to a 60% stake in Indian telecom aspirant Unitech Wireless Ltd for $1.07 billion, head of Telenor Asia, Sigve Brekke says the company is positive on the Indian market. Moody’s Investors Service placed Telenor’s credit rating under review for a possible downgrade and the phone firm’s shares plunged in Oslo after the deal was announced, but Brekke said in an interview he is confident the company has made the right move. Edited excerpts:
Analysts feel that this deal was a bit expensive, and the markets have reacted negatively. Given that there are no customers and no existing infrastructure for Unitech Wireless, how do you feel a day after announcing the deal?
I think we got this at a very reasonable price and when we make these type of valuations, we don’t look at the value that they have today. We look at the potential that they have in the future. So, the business plan that we have made and the growth opportunity we see here, we think that this valuation is very reasonable.
Positive note: Telenor Asia chief Sigve Brekke. Harikrishna Katragadda / Mint
As I understand it — you are looking at a minimum 8% market share in three years.
That I don’t want to comment on at this juncture. It is a bit too early for us to come out with our rollout plan and market strategy.
Your take on the spectrum and infrastructure shortage in the country?
There is no shortage of infrastructure in the country and I think that the model you have here — the tower sharing is a great model. And we assume that we will also tie up with some of the existing tower companies to do tower sharing in the country. And the spectrum — well that works in both ways — yes there is a shortage of spectrum but that also means that the biggest player does not have unlimited amount of spectrum so they also have to be very careful with their addition of customers. For us, we see that limitation more as an opportunity rather than a threat.
Do you have anything to comment on Ebitda?
I don’t want to comment on that either. We have a business plan on this but I want to wait till we have all the targets ready and I don’t want to share the targets till we are ready to launch.
After ten years in Pakistan and being the largest telecom provider in that country, you are still making huge losses in Pakistan?
Well, in Pakistan, we have been very successful. We entered that market as the fifth largest player with just a licence and just within three years, we climbed up to number two. We are very happy with our progression in Pakistan. We are not making losses in Pakistan – not at all. We are actually very happy with how quickly we have built up our market position both in terms of subscribers and in terms of revenues and profits in that country. We are not making any losses, but we are yet to be cash positive. What I am saying is that now the market is calming down a lot due to economic downturn and also due to internal problems but we still have a great amount of potential in a market like Pakistan.
Any regulatory problems thanks to your relationship with Pakistan and Bangladesh?
We really don’t hope that. In fact I don’t think it is a problem at all. There is no link between Pakistan and what we do in Pakistan and what we do here — what we are going to do here. We also see that other companies have done the same — Etisalat has come and they managed to get the regulatory approval. So, we really don’t see that as a problem in order to get regulatory approval.
The Arpu’s (average revenue per user) are falling in India, what it is your take.
I think most of the price trend in India is taken off already and it has picked up very well. I don’t expect the India price level or Arpu to fall significantly. Of course, you will have a downward trend but you will also have a lot more customers as you go deeper into the segment but I don’t think you will see any significant leap. I would claim that the main competitive situation here in India today is not on the prices anymore. It’s more on your ability to offer different segmentation, different customer programs and a competitive product portfolio. And that is what we are going to compete on.
Isn’t the Indian market a little difficult for you at this point of time?
Yeah. Of course the global economic downturn and its impact will also hit India but again we are a long-term player. We think that the Indian economy has been strong and it is going to continue to be strong.
As far as the networks are concerned are you going to go in for a full capex model, or are you going to go in for the outsourcing?
We are going in for the site-sharing model but I am not able to disclose the components of the site-sharing model now. I think that is a bit too early.
Given the context that market segmentation is going to be the competitive edge for you and your presence in Bangladesh, especially in the rural areas with Grameen phone?
I would not say synergies there are... I would say that we know pretty much how the market in Bangladesh is working and also other Asian markets like Malaysia and Thailand. And I think that we can combine the experience from these markets so that we can figure out the segmentations plan in India. India is different — the Indian market is different than our other Asian and European markets so we can only use the experience that we have in other markets and use that to come with something that we can use in this market.
To what extent has 3G affected your decision to get into the Indian market? Are you looking at offering 3G services in the country in the future given that value added services are the only way to increase Arpu’s in the country?
We have launched 3G in five of our locations and we are just about to launch it in Thailand as well. Even countries like Bangladesh we are looking at 3G and 3G is definitely something that we are carefully considering in India as well. We think that 3G is about bringing Internet to the people. We have not finalised all this yet but we are very interested in exploring the 3G opportunity as well.
At present 40% of Telenor ASA’s revenues come from Asia. What is the quantum of revenues that you see coming from Asia in the next three to four years?
I cannot give a number on this. What I can tell you is that this is a great opportunity and the whole Telenor success story is based on the fact that we go into markets with a low teledensity and penetration and grow the companies. We keep investing and then let the companies drive the revenue and then later lead the companies in to a cash flow generating business. That is what we did in Eastern Europe and that’s what we are doing in Asia now. We know that the main growth is happening in Asia at this time. We hope that the Asia companies will contribute a bigger part of the revenues in the coming future.
The rights issue that you have planned is critical for you so as to be able to pay for this deal. In an environment of recession or liquidity crunch that is prevalent now, how do you see the future of that rights issue?
Well, we know that but we believe that this is a great opportunity. We are willing to take the cost and we are willing to go through with the rights issue in this market situation, so that’s already assumed.
Is that wise especially considering the perceived poor result of Telenor?
Well, it depends on what your strategy is. If your strategy is short term, then it may not be a great thing to do but if your strategy is long term like ours…then it is something that we are willing to live with because this is a great opportunity that we are not willing to lose.