Telenor Skips India Auction, May Quit Market

Norwegian service provider Telenor might be close to wrapping up its Indian operations. The company has decided not to participate in the spectrum auction scheduled for September this year.

"We recognize the significant operational and financial improvement delivered by our Indian operation," said a press release issued by the operator, which announced second-quarter results on Tuesday. "We have however, after thorough consideration, decided not to participate in the upcoming spectrum auction, as we believe the proposed spectrum prices do not give an acceptable level of return. We will continue our efforts to meet customer demands and grow the business based on the current spectrum holding. As we evaluate our options in India, we will be disciplined on capex."

From a geographical and services perspective, the procurement of additional spectrum had looked critical to Telenor Group (Nasdaq: TELN)'s survival in India.

For one thing, the operator is present in only six circles (service areas) -- those being Gujarat, Bihar, Uttar Pradesh (East), Uttar Pradesh (West), Andhra Pradesh and Maharashtra and Goa.

Second, Telenor's current spectrum holdings fall exclusively within the 1800MHz band, limiting its ability to roll out data services economically. This is all the more significant as the market embraces 4G.

While incumbent telcos Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Vodafone India and Idea Cellular Ltd. have all launched 4G services already, Telenor has taken few steps in this area and is still heavily focused on providing prepaid services to customers.

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The future does not look promising for either Telenor or similarly sub-scale operators. Reliance Communications Ltd. , another of India's big players, recently acquired Sistema Shyam TeleServices Ltd. , while Bharti Airtel has snapped up Aircel Ltd. Telenor is believed to be in talks with Vodafone India regarding a possible sale of the Indian business. (See Airtel Acquires Videocon's 1800MHz Spectrum and MTS India Merges With RCom.)

Telenor had previously asked the government to reserve one block of 700MHz spectrum for rural broadband and to set a low reserve price for those airwaves, but authorities rejected the request.

— Gagandeep Kaur, contributing editor, special to Light Reading

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