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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

bbiswas 12/5/2012 | 4:24:27 PM
re: Uninor Commits to India

I think it was a mistake for Telenor to crate and partner with a weak company in India last year. Telenor itself is a weak company and the combination does not have the muscle power to penetrate the Indian market.


I am wondering ig Telenor plans to introduce LTE in India or not. Can any one comment on that ?


 

digits 12/5/2012 | 4:24:26 PM
re: Uninor Commits to India

Why do you think Telenor is a weak company? For what reasons?


Telenor has to have a local partner to do business in India - was its choice of partner so bad?


Uninor doesn't have any 3G or BWA spectrum/license, so that kinda answers the question about LTE.

Gagandeep Kaur 12/5/2012 | 4:24:26 PM
re: Uninor Commits to India

Telenor partnered with a company (Unitech) which doesnt have any experience in telecom, so in that sense, it is a weak partnership. However, my feeling is that if they had entered Indian market in 2008 instead of 2009, they would have managed to make a far greater impact.


Uninor is not likely to be thinking of LTE as of now. With losses of more than $500 mn they will not be thinking of making further investments in the indian market...

pdonegan67 12/5/2012 | 4:24:25 PM
re: Uninor Commits to India

I'd observe that more than most operatos that have acquired interests in mobile operators in other countries, Telenor has tended to struggle to obtain more than a minority ownership stake in its affiliate companies. As a a result it has tended to struggle to assert itself as a high value strategic partner rather than just a passive investor.

Gagandeep Kaur 12/5/2012 | 4:24:25 PM
re: Uninor Commits to India

Telenor is not a weak company but Unitech doesnt have any telecom experience. For instance, Maxis entered India by acquiring Aircel, which helped the company...


Regarding LTE, they are not likely to think about it even by forming a deal with other operator because they are not likely to invest more than required in the Indian operations till they start making money. Besides, most of the subscribers of new operators are low-ARPU customers who are not likely to use hi-end services...


 

bbiswas 12/5/2012 | 4:24:23 PM
re: Uninor Commits to India

Indian landscape is different from that of USA. It is very difficult for a mobile provider to penetrate the Indian market unless the company has a deep pocket. Indian mobile business is dominated by three players only plus the government run company.


From that perspective I made my comment that Telenor does not have the same deep pocket (I assume) as say vodafone and Unitech (was it the partner company Telenor selected ?) was a small player in India anyway.


How is telenor doing in Norway ? Does it operate in other EU countries also ?


Buddhadeb Biswas


Polaris Networks ([email protected])

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