India mobile telcom market bound to consolidate: Telenor

BARCELONA Fri Nov 16, 2012 12:06pm IST

A visitor rests under a Telenor Group sign at the GSMA Mobile World Conference in Barcelona February 18, 2009. REUTERS/Gustau Nacarino/Files

A visitor rests under a Telenor Group sign at the GSMA Mobile World Conference in Barcelona February 18, 2009.

Credit: Reuters/Gustau Nacarino/Files

Stocks

   

BARCELONA (Reuters) - India's mobile phone market is bound to consolidate after an expensive licensing process, helping Norway's Telenor (TEL.OL) turn a profit in the country after years of losses, finance chief Richard Olav Aa said.

The consolidation and further licence sales could present expansion opportunities, but Telenor is comfortable with its new size after giving up licences in several states when they got too expensive, Aa told a conference on Thursday.

"The marketplace will rationalise itself to a great extent in the next period," Aa told an industry conference. "You'll see more consolidation in India within circles."

Aa said that India's regions, or circles, with 70 to 80 million people could each support about five players, even though some have seven or more.

Telenor, which has over 150 million customers in Europe and Asia, won back the right to operate in six circles on Wednesday after courts had revoked licences awarded in a previous, corruption-tainted award process.

The firm originally operated in 13 circles but scaled back to nine this year and even threatened to exit the market if auction prices went too high.

Aa defended the reduced size, saying Telenor's cost model was superior, allowing it to compete with national players.

"While you do need scale in each circle you are in, we don't see the need to be pan-Indian so as to achieve the cost position we need to compete with Bharti (BRTI.NS) and Vodafone (VOD.L)," he said.

The market is so focused on voice traffic in urban areas Telenor can also save on infrastructure costs, he said.

"You have to remember that 70 percent of revenue in India comes from people who use only voice minutes in a small area. You don't need to be everywhere, on highways and in every city to succeed," he said.

The firm also moved infrastructure from areas where it stopped operating, reducing capital expenditure needs further.

Should Telenor's current spectrum prove insufficient, the firm would consider purchasing more as not everything was sold in this week's auction.

Telenor chose to scale back its operations in India to save on capital spending after it promised shareholders to keep peak funding needs there under 155 billion rupees.

"They would have blown right through that cap if they had stayed in all those (nine) areas, so this shows that they are being disciplined," Morgan Stanley analyst Nick Delfas said. (Writing by Balazs Koranyi; Editing by Mark Potter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared
BSE Sensex rises over 1 percent on reforms, election boost

BSE Sensex rises over 1 percent on reforms, election boost

The BSE Sensex and Nifty rose more than 1 percent on Monday to mark their biggest daily gain in more than one week after the government's energy reforms led to a rally in oil firms, while wins by Prime Minister Narendra Modi's party in two state elections raised expectations for additional reforms.  Full Article 

REUTERS SHOWCASE

Indian State Media

Indian State Media

Controlling the message: Modi chooses state media  Full Article 

ONGC Stake

ONGC Stake

Govt meeting bankers to discuss share sale in ONGC - source  Full Article 

Gold Curbs

Gold Curbs

Finance Ministry wants to reimpose curbs on gold imports - ET  Full Article 

World Stocks

World Stocks

Shares advance on strong data, earnings  Full Article 

IBM Chip Unit

IBM Chip Unit

IBM to pay Globalfoundries to take chip unit  Full Article 

Eyeing Reebok

Eyeing Reebok

Investor group aims to buy Reebok unit - WSJ  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage