Uninor Commits to India

Telenor subsidiary reiterates its targets and strategy for the Indian market despite tough competitive conditions

September 7, 2010

3 Min Read
Uninor Commits to India

Despite ongoing losses, and counter to some industry speculation, Indian mobile service startup Uninor remains committed to its targets for the Indian market.

Some analysts, reports Bloomberg, have suggested that Uninor, in which Norway's Telenor Group (Nasdaq: TELN) holds a 67.25 percent stake, should exit the Indian market because of reported accumulated losses of around US$556 million since the launch of its operations in December 2009. (See Uninor Launches in India, Uninor Launches in New Circles, and Telenor Reports Q2.)And there have also been rumors that Telenor might revise its outlook for the Indian market.

However, the company today denied it is planning to quit the Indian market. "Uninor's target is still to secure an 8 percent market share by 2018, be EBITDA positive in three years, and cash-flow positive in five years," stated Glenn Mandelid, Telenor's regional head of Asia, in an email response to questions from Light Reading Asia.

Despite the speculation, many believe that having a strong and experienced overseas parent -- Telenor has already had success nearby with Grameenphone in Bangladesh and Telenor Pakistan -- makes Uninor the most promising of India's numerous mobile services startups. By the end of June it had already signed up 6 million customers, giving it a near 1 percent market share, according to data from the Telecom Regulatory Authority of India (TRAI) . (See India Adds 18M Subs in June.)

But market conditions are brutal. Intense competition, rock-bottom tariffs, and shrinking ARPUs are making it very difficult for India's new entrants to build viable businesses. And the situation is likely to get tougher with the upcoming launch of 3G services by the private operators. None of the new operators, with the exception of S Tel Pvt. Ltd. , secured any 3G spectrum in the recent auction. (See India's 3G Auction Ends, Raises $14.6B.)

As a result, there is talk that some of India's startups are considering quitting the market. (See Indian Startups Seek Exit.)

"It is going to be increasingly difficult for new players to survive in a super competitive environment. Consolidation is definitely on the cards, and since the new players cannot go for merger and acquisition [because of industry rules], they would be looking for exit options," says Harit Shah, research analyst for IT and telecom at Hyderabad-based Karvy Stock Broking Ltd.

The primary challenge facing by the new operators is that subscribers are opting to use them as secondary, not primary, SIM card providers. (See Virgin Mobile India's Second SIM Strategy.)

"Uninor's main focus is to establish itself as a preferred SIM for customers that have already bought a Uninor SIM, and to get more customers to choose Uninor as their provider of mobile phone services," says Telenor's Mandelid.

To achieve this, the company has decided on a three-pronged strategy to increase its market share in India.

"Uninor has stated that its ambition is to focus on being best on three things: First, distribution, since a direct contact with the customer is crucial. In other Asian markets where Telenor operates, Telenor is best-positioned on distribution, and we want to replicate that in India, too," says Mandelid.

"Second, Uninor wants to be the best on basic services, like voice and 2G data services. Third, Uninor wants to be low on costs, taking advantage of having no legacy issues." (See Interview: Rajiv Bawa, EVP Corporate Affairs, Uninor and Uninor Unveils 'Dynamic Pricing’.)

— Gagandeep Kaur, India Editor, Light Reading

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