Telenor Takes Mobile Stake in India
Telenor's entry into the Indian mobile market rounds out its emerging market mobile empire that spans from Central and Eastern Europe to Thailand. But the $1 billion price to take part in India's mobile boom looks high. (See Top Ten: Emerging Markets Carriers.)
"Gaining access to the world's second largest mobile market is a major achievement for Telenor," said Telenor president and CEO Jon Fredrik Baksaas. "Entering the Indian mobile market gives Telenor a unique possibility to further enhance the Telenor Group's position as one of the leading emerging markets operators."
India is one of the fastest growing mobile markets in the world and the second largest mobile market after China. So far this year, India has added about 8 million mobile subscribers each month, according to Telenor. With a population of 1.2 billion and mobile penetration 26 percent, Telenor sees significant room for growth.
But Telenor is paying $1 billion for a startup mobile operator that has not even launched services yet. Founded in 2007, the Unitech Wireless has 250 employees. The operator has licenses in all 22 telecom circles and plans to launch GSM services in mid-2009. (See A Guide to India's Telecom Operators.)
A Telenor spokesman tells Light Reading that Unitech already has tower sharing agreements in place with tower vendors and owners and that will make the GSM network rollout "faster and cheaper."
Telenor said it plans to fund the acquisition through a $1.8 billion rights issue in the first quarter next year.
Third quarter profits fall
Telenor's third quarter net income fell 30 percent to 3.4 billion Norwegian kronor (NOK) (US$507 million), compared with NOK 4.8 billion ($716 million) in the same quarter last year. Operating profit for the quarter was down 9.5 percent to NOK 3.8 billion ($566 million), compared with NOK 4.2 billion ($626 million) a year ago. And third quarter revenues were up 3 percent to NOK 23.8 billion ($3.5 billion), up from NOK 23.1 billion ($3.4 billion) a year ago.
The operator added 6 million mobile subscribers in the quarter across all its markets, bringing its total mobile subscriber base to 159 million. Telenor has operations in Norway, Sweden, Denmark, Ukraine, Serbia, Hungary, Montenegro, Thailand, Malaysia, Bangladesh, and Pakistan.
In Asia, Telenor says the business environment is "turbulent" and as a result is forecasting lower growth in the region. In Pakistan, in particular, Baksaas said Telenor is "experiencing a challenging market with reduced consumer spending, increased competition as well as an increase in consumer sales tax. This has affected both revenues and margins negatively this quarter."
In Central and Eastern Europe, Baksaas said Telenor's operations "maintained strong market positions and delivered a quarter with strong financial results."
In Russia, Telenor is tangled in a long-running dispute with fellow shareholders of Vimpel-Communications (NYSE: VIP), in which Telenor holds a 29.9 percent stake. The latest twist in the saga is that a Siberian court has frozen Telenor's shares in the Russian mobile operator. (See Brrr! Russian Court Freezes Vimpelcom Shares.)
A Telenor spokesman tells Light Reading that the share freeze will not have "any major impact" on the Norwegian operator unless it decides to sell those shares, which it has no plans to do. "It's an incredibly good asset for us, even though the share price has fallen as a result of the financial crisis," says the spokesman. "We expect it to be good again when the financial crisis is over."
— Michelle Donegan, European Editor, Light Reading