Telenor wants 50 percent cut in Mumbai licence fee

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

OSLO (Reuters) - Norway's Telenor (TEL.OL) is unlikely to bid in an auction for mobile licences in Mumbai unless India halves the fee, its Chief Executive Jon Fredrik Baksaas said on Friday.

"It is nearly impossible to participate in the Mumbai auction at the current price level," the CEO of India's sixth largest telecoms operator said.

India is looking to reduce some prices for a new auction to be held by March after an overpriced sale in November failed, having attracted no bids for four areas, including New Delhi and Mumbai.

Telenor, which aims to have 55 million customers in India by 2016, has asked authorities to cut the licence fee by 50 percent, more than the 30 percent cut proposed by a panel of Indian ministers, Baksaas told Reuters after meeting with Indian officials in Davos.

"We expect the upcoming auction to be sub-optimal if the current price level is maintained - it will be comparable to the November auction, with limited participation," Baksaas said after the meeting which also included India's Union Commerce and Industry Minister Anand Sharma.

India is auctioning licenses after a court ordered the government to cancel 122 licenses granted in a corruption-tainted auction.

Telenor responded by downsizing its operations to six areas of the country from an initial 13, saying it would rather leave certain markets than overpay.

Telenor is now maintaining its Mumbai operations but made it clear it is ready to shut down as it is not willing to lift its self-imposed funding cap of 155 billion rupeesfor its loss-making Indian operations.

"If the funding cap stays, they must get both the reduction plus a 2 billion rupee refund on their original license," Espen Torgersen, an equity analyst at brokerage Carnegie said.

"It is encouraging that Telenor is actively working to influence the government," "There is little political prestige in trying to sell licenses again and not getting offers."

(Reporting by Joachim Dagenborg; Editing by Elaine Hardcastle)