Telenor Joins 4G Bandwagon in India

The Indian arm of Norway's Telenor is all set to launch 4G services in five to eight cities in the next six months. The operator is already in talks with other telcos about improving its spectrum position through frequency trading.

Telenor Group (Nasdaq: TELN) claims to have already launched 4G in the city of Varanasi. The use of a so-called "Lean GSM" technology from China's Huawei Technologies Co. Ltd. has helped it to modernize about 25,000 basestations. Telenor also hopes to reduce energy consumption as a result of this deployment.

But a more widespread rollout of 4G is likely to have a limited impact. Telenor's current offerings are restricted to prepaid 2G services, and it caters to just five million customers. Most of those generate very low average revenue per user and seem unlikely to be willing to pay higher charges for speedier connections.

Moreover, Telenor operates in just six of India's 23 circles (or service areas). This means the company would need to form roaming alliances with other telcos. Unless it can procure additional spectrum, or reach trading agreements with rivals, it may struggle to support higher-speed services. Having failed to acquire spectrum in recent auctions, Telenor is one of the few Indian telcos that wants a 700MHz auction to be held this year. (See India Operators Lash Out at 700MHz Plans.)

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Telenor is also entering a competitive arena. Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Vodafone India and Idea Cellular Ltd. -- India's three biggest mobile operators -- have already launched 4G services. Bharti Airtel's is currently available in around 350 cities, while Idea Cellular's covers around 100. New entrant Reliance Jio is expected to join the 4G fray in the coming months. (See Indian Incumbents Risk Tripping in 4G Race.)

As the biggest players continue to roll out 4G technology, smaller telcos like Telenor may find themselves under pressure to bulk up. Last year, Telenor was rumored to be looking at a merger with Tata Teleservices Ltd. , another Indian service provider, but a deal failed to materialize. It may have to revisit its merger plans if it wants to play a 4G role in future.

— Gagandeep Kaur, contributing editor, special to Light Reading