Uninor Must Adapt to Survive

As the Indian telecom industry increasingly focuses on the provision of data services, the road ahead is looking bumpy for Uninor, the Indian subsidiary of Norwegian telecom incumbent Telenor. (See Going Gets Tough for India's Smaller Telcos.)

Targeting first-time Internet users, Uninor offers basic packages for usage of Facebook and WhatsApp, as well as free access to Wikipedia. But its data business looks relatively unsophisticated next to those of its bigger rivals. As more customers begin taking an interest in using advanced Internet services, Uninor risks being left behind.

Bharti Airtel Ltd. (Mumbai: BHARTIARTL), India's biggest operator, is already pricing 4G services at the same level as 3G ones in 296 cities throughout the country, hoping to attract customers to higher-speed data offerings. Once Reliance Jio launches 4G in December this year, and devices become available at reasonable prices, the pressure on Uninor will be even greater.

Although Uninor currently operates in only six circles (or service areas) of the country -- Uttar Pradesh West, Uttar Pradesh East, Bihar (including Jharkhand), Andhra Pradesh, Maharashtra and Gujarat -- these are important markets with enormous potential when it comes to data services (Uninor did pick up spectrum to operate in Assam in 2014 but has yet to launch a network in this circle).

Encouragingly, however, the operator -- which currently serves around 48 million subscribers -- has begun taking steps to modernize its network. It recently awarded a contract worth 12 billion Indian rupees ($180 million) to Chinese equipment maker Huawei Technologies Co. Ltd. , which is to carry out upgrades to Uninor's network in all six of its circles. Huawei will also assume responsibility for network management in the future.

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In particular, the Chinese company is to introduce IP technology at nearly 24,000 Uninor sites by 2017, allowing the operator to launch 4G services. Uninor has already conducted LTE trials and would be able to launch services over any of its airwaves, all of which have been "liberalized" for use with any technology standard. Telenor Group (Nasdaq: TELN)'s 4G experience in other markets should also help Uninor avoid any pitfalls when it starts to roll out 4G services.

The introduction of new spectrum-sharing guidelines by Indian authorities could also be of benefit to Uninor. Although it participated in India's latest spectrum auction earlier this year, Uninor failed to secure any licenses. Yet by teaming up with other players, the operator could boost its capabilities in circles where it is already present. Once they come into force, spectrum-trading rules might provide further opportunities for Uninor.

Another option for Uninor might be takeover activity. Indeed, it was recently reported to be in discussions about merging its business with that of Videocon Telecommunications Ltd. , another mobile operator with 4G ambitions.

— Gagandeep Kaur, contributing editor, special to Light Reading

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