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Norwegian operator says spectrum prices would not generate acceptable returns, is ‘evaluating its options’ in India.
Telenor has decided not to take part in India’s forthcoming auction of mobile spectrum, citing high prices, and is considering its future in the market, it revealed on Tuesday.
"We have…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," the Norwegian operator said, alongside the publication of its second quarter results.
The comment came despite an improved performance in India.
Q2 revenues there grew by 14% year-on-year to 1.55 billion kroner (€166 million), Telenor said, adding that in local currency terms growth stood at 13%. Revenue uplift helped to drive EBITDA before other items to NOK141 million from NOK24 million a year earlier. The operator’s mobile customer base stood at 44.91 million at the end of June, up from 39.85 million 12 months previously.
Nonetheless, the telco continued to imply that it may not have a long-term future in India.
"We will continue our efforts to meet customer demands and grow the business based on the current spectrum holding," it said. "As we evaluate our options in India, we will be disciplined on capex."
While that particular remark does not give a lot away, when taken in conjunction with comments made by CEO Sigve Brekke at Telenor’s first quarter results announcement in April, it appears an exit could be on the cards.
"[Telenor’s] long-term presence in India is dependent on our ability to secure additional spectrum," Brekke said, at the time, noting that the auction and the possibility of spectrum-trading were both open to his company. "We need to be pragmatic, to consider other alternatives," if the acquisition of more spectrum turns out to be impossible, he said.
There have since been rumours of talks with Vodafone, India’s second largest mobile operator.
Earlier this month the Economic Times reported that the U.K.-based group sees Telenor as a way of boosting its own spectrum holdings, either by acquiring its frequencies or via a full takeover of its Indian operation.
With the government having set high reserve prices for the spectrum it will auction off in the next couple of months, M&A could well be a more cost-effective route for the market’s bigger players as they seek to shore up their own positions ahead of the impending launch of national 4G player Reliance Jio Infocomm.
The state has yet to set the date for the auction. Whenever it happens, should all the available spectrum across the 700 MHz, 800 MHz, 1800 MHz, 2.1 GHz, 2.3 GHz and 2.5 GHz bands sell at the reserve price, the government would raise 5.44 trillion rupees (around €73 billion). But analysts doubt that operators will be willing to commit those kinds of sums.
Crisil Research recently predicted that there will be a solid level of participation in the auction, but that operators will think carefully about their bidding strategies, with some bands – the 800 MHz, 900 MHz, and 1800 MHz in particular – proving more desirable than others. The analyst firm puts the total auction spend at around INR1 trillion.
The market’s big three players – Bharti Airtel, Vodafone and Idea Cellular – will together contribute 55%-60% of the total spend, Crisil predicts.
Telenor’s decision not to take part appears to back up the analyst firm’s beliefs.
