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Business News/ Companies / Telenor Group not to participate in upcoming spectrum auction
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Telenor Group not to participate in upcoming spectrum auction

Telenor Group backs out of bidding on high reserve price; move signals its diminishing interest in India's telecom sector

CEO Sigve Brekke says Telenor Group will remain disciplined on capital expenditure in India, even as the firm evaluates its options in the country. Photo: BloombergPremium
CEO Sigve Brekke says Telenor Group will remain disciplined on capital expenditure in India, even as the firm evaluates its options in the country. Photo: Bloomberg

New Delhi: Telenor Group has said that it will not participate in the upcoming spectrum auction in India as the high reserve price makes it financially unviable, signalling the Norwegian firm’s diminishing interest in the country’s telecom market.

“We recognize the significant operational and financial improvement delivered by our Indian operation. We have, however, after thorough consideration, decided not to participate in the upcoming spectrum auction, as we believe the proposed spectrum prices do not give an acceptable level of return," Sigve Brekke, chief executive officer at Telenor Group, said in a statement, shortly after the Norwegian company’s announced its second-quarter results.

During the April-June quarter, Telenor India’s customer base rose 13% to 44.9 million from a year earlier. Brekke said that the company will look to grow the business based on the current spectrum it holds. “As we evaluate our options in India, we will be disciplined on capex," Brekke said.

Separately Brekke told Reuters, “We need more spectrum in India to be able to compete in the data segment, and we don’t have that solution... We need to consider all different options. What those options may be in a very dynamic market, I don’t want to speculate on," he said, adding that he was looking for a long-term solution “as soon as possible".

In March, Telenor had said it may exit India unless it is able to secure additional capacity for its networks at a reasonable cost.

Brekke said Telenor would be cautious on capital expenditure in India, which accounted for only 4% of Telenor’s total capital spending in the second quarter.

The move may prove to be a dampener for the Indian government, which plans to generate 5.66 trillion in revenue from the spectrum auction, going by the base price. The spectrum auction is expected to conclude in September.

The auction will also, for the first time, see the highly efficient, but expensive, 700 megahertz (MHz) frequency being offered. It is priced at 11,485 crore for 1 MHz. This makes the industry liable to pay 57,425 crore for 5MHz on a pan-India basis.

While the receipts from the spectrum auction will boost the central government’s exchequer, the availability of spectrum will expand the bandwidth and the ability of telecom companies to service consumers and address the problem of call drops.

In the event of aggressive bidding, the balancesheets of telcos, already overburdened by debt, will come under further pressure.

The government is putting on sale 700MHz, 800MHz, 900MHz 1,800MHz, 2,100MHz, 2300 MHz and 2,500 MHz bands in the auction. The 700 MHz band, which is the most expensive, is likely to generate low interest.

The telecom industry has given the impression of “cribbing every time the government announces some reserve price", said an expert with a leading consultancy. “(But) each time we have had record collection. There is too much cribbing happening, and these guys have the money. That’s the impression that has gone out," said the expert requesting anonymity.

“It needs to be judged how the government sees the sector—as a revenue generator or enabler. May be the government needs to think about it," the expert said.

Telenor India currently has 4G airwaves in the 1,800 MHz band in seven circles but offers 2G services in six of them—Andhra Pradesh, Uttar Pradesh East and West, Bihar, Gujarat and Maharashtra. It hasn’t yet started services in Assam.

The Norwegian firm entered India rather late, in October 2008, when companies such as Bharti Airtel Ltd and Vodafone India Ltd were well established.

Telenor bought a 60% stake for $1 billion in Unitech Wireless Ltd, a company that had licences to operate mobile services but little else—no customers or cash flows.

The joy of entering the country was, however, short-lived. A rude shock awaited it in February 2012.

Giving its verdict in the 2G telecom scam case, the Supreme Court of India cancelled 122 telecom licences awarded to nine companies, including all of Telenor’s 22 permits.

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Published: 20 Jul 2016, 02:16 AM IST
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