Telenor scales back India operations

Nov 14 2012, 22:49 IST
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Telenor scales back India operations (Reuters) Telenor scales back India operations (Reuters)
SummaryTelenor has over 150 million customers in Europe and Asia.

Norway's Telenor won back its telecom operating licences in six of India 's most populous states, paying less than markets expected and ending 10 months of uncertainty after courts cancelled its permits.

Telenor, which has over 150 million customers in Europe and Asia, agreed to pay 4.2 billion crowns ($731 million) for the six licences, a relief to investors who feared the firm would go after more permits and could end up paying twice the eventual figure.

We will stay present in areas that make up over half of India 's population and continue to have 34 million customers, Chief Executive John Fredrik Baksaas said.

This puts us on track to break even in India  by the end of next year, Baksaas said.

India  cancelled 122 operating permits awarded in a corruption-tainted licensing round, forcing Telenor and others to reapply and raising the risk of a cost blow out for a venture that has never made a profit.

To cap the risk, Telenor scaled back operations to nine India n circles from 13 and said it would quit the country altogether if the auction price went too high.

 I didn't expect them to cut back to six circles; it shows they were disciplined, Sparebank 1 Markets analyst Tore Toenseth said. They look to have paid the minimum price and that's good.

India  is the world's second biggest mobile market by customer numbers but margins are low and investors have argued that Telenor could make higher returns elsewhere.

The cost to re-purchase the original 13 circle holdings would have been around 11.1 billion crowns and for the 9 current circles around 7.9 billion, Bank of America Merrill Lynch said in a note.

In other words, by this measure, the company is scaling back the original exposure to India  by around 60 percent and even the revised exposure by about one-half.

The fee raised in the auction was a clear disappointment to India 's deficit-constrained government as it raised less than a quarter of its target.

 Telenor will pay a third of the spectrum fee within 10 days and the rest in ten equal instalments between 2015 and 2024. However, a fee of 16.58 billion rupees paid for its previous licenses, may be used to reduce its first payment.

Telenor will now operate through a new venture called Telewings, held in 26 percent by Lakshdeep Investments, after buying out India n property firm Unitech from their previous venture.

The new company will take over the

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