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Telenor sets lofty targets for reorganised Asian ops

Norwegian telco group Telenor has reorganised its presence in Asia as part of an ambitious growth strategy for the region.

During last month’s capital markets day, Telenor said its operations in Bangladesh, Malaysia, Pakistan and Thailand will be managed by a newly-formed Telenor Asia unit, tasking it with building scale and increasing profits in an effort to become a leading player in these countries.

All very ambitious-sounding, but light on detail. On Tuesday, Telenor fleshed out these plans, providing more insight into how Telenor Asia will operate, and what it wants to achieve.

Without doubt the most eye-catching detail is the cash flow target of $1.2 billion by 2025. Telenor Group as a whole didn’t quite achieve that in 2021 – it recorded free cash flow before mergers and acquisitions of $1.02 billion, down from $1.16 billion in 2020.

That said, if any one part of Telenor Group is going to hit that cash flow target, it’s going to be Telenor Asia. Its Asian opcos accounted for more than half of the group’s revenue last year – $5.11 billion in Asia compared to $4.87 billion in the Nordics – and generated much higher operating profits: $1.22 billion versus $761.1 million.

In terms of customers, by the time Telenor wraps up its mergers in Malaysia and Thailand – which appears to be a formality in the former, but not 100% nailed-on in the latter – Telenor Asia will boast 200 million mobile subscribers. That’s nearly 10 times the entire combined population of the Nordic countries.

To achieve its cash flow target, Telenor Asia said it aims to improve mobile adoption, particularly in Bangladesh and Pakistan. It notes that 150 million people living in these countries do not currently use a mobile device, and 50 percent of those that do, only use voice services.

It also wants to increase B2B revenue in Asia. It currently only accounts for 5% of Telenor Asia’s revenues, so there is plenty of growth potential here. Telenor said that during the pandemic, Telenor’s B2B revenue in Asia grew 10% while the rest of the market contracted.

Telenor Asia also plans to improve cash flow by rolling out new digital services, such as gaming, insurance, and cybersecurity services.

In addition, Telenor has announced some organisational changes at Telenor Asia. It wants to expand the team at its Singapore headquarters, giving it greater autonomy. It plans to appoint experts in finance, operations, risk management, people management, governance and responsible business. Meanwhile, each market now has dedicated investment management teams that act as asset managers and represent Telenor’s interests at local board level.

“The strengthened team at our Singapore headquarters will add value to our operations and safeguard our interests in the region,” said Jørgen Rostrup, Head of Telenor Asia, in a statement.

“This will also help us ensure value creation of our assets, and we will explore structural partnerships or, in the future, a potential IPO,” he said.

Combine the enlarged management team in Singapore – replete with its ambitious new growth targets – with the operational and financial size discrepancy between the Nordics and Asia, and Norwegian incumbent Telenor looks increasingly like an Asian telco that does some business in Europe.

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