news


Telenor

Telenor Denmark is the first European customer for AsiaInfo Linkage

Telenor's expansionist ambition is undimmed

Telenor's expansionist ambition is undimmed

The ninth largest international cellular operator in the world, Telenor’s expansionist ambition is undimmed. But the firm has not always had an easy time with M&A activities.

Norway is a country steeped in the history of mobile communications; it was a Norwegian university solution that won the CEPT competition in Paris in 1987 to determine which standard would go on to become GSM. It was also the first European country to get an automatically switched mobile telephony service when NMT debuted in 1981.

At each stage of the country’s communications development, Telenor-which began life as a state-owned PTT called Telegrafverket in 1855-has played an instrumental role. Today the carrier, now partially privatised-the Norwegian Government still holds a little over 50 per cent of the company-ranks as the ninth largest mobile carrier by proportionate subscribers, according to the Informa Telecoms & Media World Cellular Investors service.

The firm has shareholdings in mobile operations in 12 markets (see table) and had a proportionate subscriber base of 86.7 million at the end of June this year. Ninth¬† largest in the world is clearly not enough for the Norwegian incumbent, though, and expansionist ambitions remain at play in the boardroom. At the firm’s capital markets day in June 2008, CEO Jon Fredrik Baksaas said Telenor was considering a number of opportunities, including, “expansion within existing regional clusters”.

Indeed, at the time of writing, Telenor is believed close to securing a 43 per cent stake in Indian carrier Unitech, which holds licences to operate in a number of Indian telecoms circles but has yet to begin service. Big ticket purchases are likely to be the order of the day for Telenor, given that climbing the rankings once inside the top ten is a substantial undertaking.

However, Telenor’s emerging markets have not been offering the kind of return that might be traditionally associated with high growth operations during 2008. Like other international carriers, Telenor looked to the emerging markets to compensate for slowing growth in its saturated domestic and local markets. But in July this year it warned of weaknesses in its Asian territories, caused by a reduction in consumer spend brought about by inflation rate increases. In contrast, the firm’s Q2 performances in Europe were stronger than expected.

The carrier has not always had an easy time of acquisition and investment. In 1999 a proposed merger between Telenor and Swedish incumbent Telia foundered as a result of political differences; top of a list of disagreements was the issue of where to site the firm’s headquarters with each firm (both were entirely state-owned at the time) coveting the national kudos. It may have galled Telenor that, subsequent to the collapse of this proposed marriage, Telia found happiness with its opposite number in Finland, creating TeliaSonera.

More recently Telenor was an object of desire for another big international ex-PTT; France Telecom’s Orange. The French carrier expressed an interest in both Telenor and TeliaSonera and the Norwegian’s response was to voice its own enthusiasm for a takeover of The Swedo-Finnish JV. None of the proposals came to fruition, with the substantial overlap in operations between Telenor and Telia-primarily in Sweden, Denmark and Norway-seen as the most decisive obstruction.

And when deals have succeeded, Telenor has not always been blessed with calm waters. It has suffered from long-running disputes with Russian investment group Altimo. The two firms are co-shareholders in Russian carrier Vimpelcom and Ukrainian player Kyivstar and have long jostled for control of the two ventures.

In October reports began to circulate of a possible solution that would see each cede control of one of the operations to the other. It was suggested that Altimo would gain control of VimpelCom, with Telenor reducing its stake, with the Nordic operator buying Altimo out of Kyivstar altogether. The twist in the tale saw Altimo gaining a five per cent stake in Telenor. At the time of press neither company was offering comment (Telenor was in a quite period ahead of its Q3 results announcement).

Telenor is one of the few big international cellular players to have experimented openly with WiMAX. As the dominant ADSL player in Norway, Telenor has population coverage of over 90 per cent. But in October 1997, when the firm announced plans to deploy a WiMAX network at 3.5GHz, as many as 800,000 homes were beyond the reach of existing broadband service. In September this year the firm signed a deal with Airpsan to expand its Norwegian WiMAX network.

In May this year Telenor won a 2.6GHz licence for 4G services in Sweden, although it is not clear that it intends to pursue a mobile WiMAX path. If anything, the firm looks to be leaning towards LTE in Sweden, with Swedish CEO Johan Lindgren saying at the time: “This is the most important spectrum auction since the 3G frequencies were distributed, and I’m very pleased that Telenor Sweden now holds this opportunity to build high-quality 4G networks and provide our customers with the many possibilities provided by next generation mobile services and Long Term Evolution (LTE) technology.” Telenor won a 2.6GHz licence in Norway late last year.

Traditional telecoms activities aside, the Norwegian incumbent bills itself as a corporation with a conscience. Listed as number one on the Dow Jones Sustainability Index for 2008, the firm was also ranked the “best Mobile Telecom company” in The Sustainability Yearbook 2008, which is put together by PriceWaterhouseCoopers and Sustainable Asset Management (SAM). Each year the 2,500 largest companies (based on the Dow Jones Global Index) are invited to participate in SAM Corporate Sustainability Assessment and the top 15 per cent of each of the 57 SAM sectors qualify for inclusion in the Sustainability Yearbook.

And Telenor has been called upon to prove its CSR credentials in two incidents this year. The first saw Bangladeshi outpost Grameenphone caught up in a child labour scandal, albeit two places removed from the offence. The guilty organisation was a subcontractor to one of Grameenphone’s suppliers but Telenor moved quickly to respond.

“This clearly shows the dilemmas we face when doing business in developing countries. Telenor is systematically working to evaluate and develop health, safety and environmental issues with our subcontractors, but there will always be challenges in developing countries and we have in the past few months concentrated on those that we are in direct relationship with,” said Hilde Tonne, Executive Vice President of Telenor.

More recently the carrier publicly announced the suspension of Chinese vendor ZTE from all new business pitches for a period of six months, stating that ZTE had breached Telenor’s code of ethics.

Decency doesn’t pay the bills, though, and Telenor is in the business of making money. Home to just 4.64 million people, Norway is by far the smallest country in population terms to have an international mobile operator in the world’s top ten; an achievement in itself. But ninth place will clearly not suffice. In all likelihood any bid to climb the ranks will be marked by large scale M&A involving another player with an existing international portfolio.

The firm’s Q3 results will likely shed some light on its expansionist wherewithal and, given the warning it has already issued this year about growth in its Asian territories, it is not clear where in the world further money might be spent.

Company History

1855: The Norwegian Telegraph Administration’s first telegraph line, between Drammen and Christiania, is officially opened.

1878 The first inter-city telephone connection opens between Arendal and Tvedestrand

1920 The first automatic exchanges are installed in Norway.

1966 The first manually switched mobile telephony system is introduced.

1969 Nowegian Telegraph Administration changes its name to Norwegian Telecommunications (Televerket).

1981 Mobile telephony is automated and NMT is launched in Norway.

1993 GSM service launched after Televerket’s wholly owned Tele-mobil wins one of two GSM licences in 1991.

1995 – 97 Newly named Telenor wins licences in Montenegro, Ukraine and Bangladesh after Northwest GSM, in which Telenor holds 13 per cent, starts service in St. Petersburg, Russia.

1999 Attempted merger with Telia fails

2000 onwards:  Telenor privatised in largest ever Norwegian listing. Takes stake in Thai operator TAC, increases stakes in Malaysia and Hungary. WCDMA operations begin in 2001. Pakistan, Denmark, Serbia added to portfolio. Hits 86.7 million proportionate subscribers in 2008

Telenor’s international cellular investments

Carrier Country Stake size Subs (09/08)
Digi Malaysia 49% 6,788,200
DTAC Thailand 65.5% 18,205,300
Grameenphone Bangladesh 62% 21,895,400
Kyvistar Ukraine 56.5% 23,618,700
Pannon Hungary 100% 3,579,100
Promonte Montenegro 100% 548,500
Sonofon Denmark 100% 1,739,900
Telenor Norway 100% 2,966,300
Telenor Pakistan 100% 19,179,100
Telenor Sweden 100% 1,911,200
Vimpelcom Russia 33.6% 44,039,200
Telenor Serbia 100% 3,122,100

Source: World Cellular Information Service and Telenor

Tags:

Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

How have open source groups influenced the development of virtualization in telecoms?

Loading ... Loading ...