Telenor moves into India as profits slide

Norwegian carrier Telenor said Wednesday that it has agreed to buy 60 per cent of Indian mobile licensee Unitech Wireless, for just over $1bn.

Mobile start up Unitech has spectrum licences for all 22 telecom circles, and plans to launch services mid 2009.

The attraction of the Indian telecoms market is no secret. The country is growing at a staggering rate. It is the second most populous country in the world and is expected – if current growth trends continue – to overtake China before the middle of this century. And it is a youthful country; of the estimated 1.14 billion people living in India at present, some 40 per cent are under 15 years of age and 54 per cent are under 24. The median age is 25.

The economic strength of India and Indians is undoubtedly on an upward curve, although ARPU is low by Western standards, ranging from $4.60-$8.90 per month according to Informa Telecoms & Media’s World Cellular Information Service. Falling ARPU figures in India, are compensated by surging growth though. Penetration has more than doubled since June 2006 and stood at 21.67 per cent in March this year. With 242 million mobile phone subscribers nationwide there is plenty more scope for growth.

Alongside Unitech, Informa Telecoms&Media’s World Cellular Information Servicecurrently lists a further five planned or potential networks: Agrani Telecom; ByCell; Datacom; S Tel; and Swan.

“Gaining access to the world’s second largest mobile market is a major achievement for Telenor. 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, and enables us to take part in the development and growth opportunities in one of the fastest growing telecom market in the world,” said Jon Fredrik Baksaas, president and CEO of Telenor.

But for the third quarter, Telenor reported a decline in profit after tax, which fell to NOK3bn (Eur349m), from NOK5bn in the same period last year. Revenues however, grew slightly to NOK27.6bn from NOK26.5bn last year.

During the quarter, the carrier’s mobile operations added 6 million subscriptions, reaching a total of 159 million.

“Our business environment is currently more turbulent and we foresee a period with lower global growth. In Asia in particular, the revenue development continues to be affected by the macro economic development as well as strong competition. In Pakistan, we are experiencing negative market parameters with reduced consumer spending, intense competition as well as an increase in consumer sales tax. This has affected both revenues and margins negatively this quarter,” said Baksaas.

The disappointing financials follow bad news earlier in the week, after Telenor said that it had received notice that a Siberian appeals court has arrested Telenor and Altimo’s (Alfa) shares in VimpelCom, amounting to almost 63 per cent of the company.