Telenor all set to enter game of tariff war in India
Norwegian telecom firm Telenor, which is slated to roll out pan-India operations by year-end under the UniNor brand, said the ongoing tariff war in the country is hardly surprising. It has factored in losses to the tune of Rs 15,000 crore in its first five years of operations.
“It is no surprise that there is a price war in the Indian market. Tariff wars happen when telecom penetration goes up from 30% to over 40%,” said Fredrick Baksaas, president & CEO of the Telenor Group. “We are structuring our operations in such a way that our core earnings — earnings before interest, taxes, depreciation & amortisation (EBITDA) — break even in three years. We are targeting an operating cash flow break-even in about five years from the launch,” he told ET, on the sidelines of the ITU World summit in Geneva.
“India is a large country — it is a continent by itself and we are targeting profits in five years from there. Even in Norway — Telenor’s home market — we took seven years to break even,” he added. Telenor’s operations in India will be through Unitech Wireless, in which it holds a 67.25% stake. In October 2008, Telenor bought 60% in Unitech Wireless for Rs 6,120 crore.
But in March 2009, the cash-strapped realtor agreed to give away an additional 7.25% stake to Telenor at no additional cost in return for not having to pump in more funds into JV for the next two years and higher repayment of debt. Telenor operates in 13 countries and has some 170 million users. As reported earlier by ET, Telenor has reduced its capital expenditure in 2009 by about 30%.
