Telecom operator Telenor
on Tuesday said it will not participate in the upcoming spectrum auction but decided to continue for sometime to lower exit cost and find alternatives for its business in India.
The company has also indicated to take call on its future after evaluating impact of the Reliance Jio
commercial launch in India.
"We need more spectrum in India to stay competitive in long term. Then, we have decided not to participate in upcoming spectrum auction. The reason we are not participating is the price levels that regulator has proposed. In the meantime we will fight to take our marketshare and take our fair share of market growth," Telenor Group CEO Sigve Brekke said while announcing financial result of the group.
Telenor India reported to have 4.4 crores subscribers on its network. The company in India targets subscribers that have low spending capacity.
While announcing financial results for first quarter ended March 31, 2016, Brekke had said, "Long term presence in India is dependent on our ability to secure additional spectrum."
He said Telenor is waiting for launch of Reliance Jio to see its impact on India market. Experts see that commercial launch of Jio's 4G service will disrupt market. Telecom majors have already started
slashing mobile internet rates to keep away the threat from Jio.
Mukesh Ambani-led Jio claims to have 15 lakh users of its service even before its commercial launch.
Telenor reported widening of its operating loss in India to 132 million Norwegian Krone (about Rs. 105 crores at present exchange rate) in the second quarter ended June 30, 2016 compared to NOK 90 million (Rs. 71.3 crores) it posted a year ago.
The company has already written off assets in India which impacted its performance in the reported quarter.
Brekke said Telenor India team will find other option and long-term solution. "We have communicated earlier, that we are going to make rationale decision in India. We are in India to make money and give return to our shareholder. We are continuing to evaluate different option," Brekke said.
Compared to other South Asian markets like Pakistan, Bangladesh, Myanmar where subsidiaries of Telenor have reported cash flow of above 40 per cent, Telenor India has posted positive cash flow of 9 per cent in the reported quarter.
The total revenue of the company, however, grew by about 12.73 per cent to NOK 1551 million (Rs. 1,230 crores) from NOK 1362 million (Rs. 1,080 crores) during period under review.
When asked about the cost impact on Telenor if it immediately exits from India, Groups Chief Financial Officer Morten Karlsen Sorby said, "If you look at accounting point of view, you apply fair value less cost of disposable assets related to recording value in India. This led to an impairment loss of NOK 2.3 billion in the first quarter and the recoverable amount of intangible assets which are still in the books is NOK 4.4 billion."
However, he refused to provide exact impact on the company.
Telenor India offers GSM-based services in six out of 22 circles in the country. The company has operations in Andhra Pradesh, Uttar Pradesh East and West, Bihar, Gujarat, and Maharashtra.
Telenor in its report for the June quarter said: "We will continue our efforts to meet customer demands and grow the business based on the current spectrum holding. As we evaluate our options in India, we will be disciplined on capex."
The government is planning a mega-spectrum auction in which airwaves worth Rs. 5.66 lakh crores will be put up for bids. As per global telecom industry body GSMA, the total value of spectrum auction at base price is more than 20 times the annual free cash flow of the entire mobile industry in India and almost double the cost of all spectrum investment to date in the country.
Telenor during consultation with telecom regulator Trai
to decide base price for mobile airwaves, was among couple of companies that pushed for auction of most valuable spectrum in 700MHz band.
Trai has recommended Rs. 11,485 crores per MHz base price for auction of spectrum in 700MHz band, the highest ever for any radiowave and the same has been accepted by the government.
Out of total spectrum value of Rs. 5.66 lakh crores, the quantum of airwaves frequency in 700MHz band being put for auction alone constitutes about Rs. 4 lakh crores.