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| Telenor investors say 'Quit India' as venture's losses pile up |
| Press Trust of India/Bloomberg / Helsinki Sep 06, 2010, 18:42 IST |
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 Telenor ASA investors have a piece of advice for Scandinavia's biggest phone company: Quit India.
Nine months after its debut in the Indian mobile-phone market, Telenor has accumulated 3.4 billion kroner ($556 million) in operating losses. The Norwegian company spent about $1.3 billion to buy control of its India venture and invested 4.8 billion kroner more on capital expenditure. It has forecast the division will be profitable in three years.
"Most investors don't apply any value to the Indian operations," said Jesper Kruger, a fund manager at ATP, Denmark's biggest pension fund, who helps manage 50 billion euros ($64 billion) of assets, including Telenor shares.
"Quitting India would certainly help sentiment."
Telenor’s experience in India, the world’s second-largest mobile-phone market after China, mirrors that of Vodafone Group Plc as more than a dozen operators compete for users, pushing call rates to as low as a penny a minute.
Telenor may revise its outlook for India at its annual investor meeting on September 21, said Martin Hoff, an analyst at Arctic Securities in Oslo.
"The average revenue per user in India has collapsed in the last two years to a level below Telenor’s expectations," Hoff said. "The old guidance of breakeven in three years looks impossible and I expect they will incur pretty large losses every quarter for the next couple of years."
Telenor, based in Fornebu, Norway, entered India by buying a stake in Unitech Wireless, an arm of Unitech Ltd, the real estate company controlled by Indian billionaire Ramesh Chandra.
The venture, called Uninor, was designed as a lean operation that could win customers with cheap rates, following Telenor's successful operations elsewhere in Asia. It strove to keep investment down by leasing tower access from other companies and outsourcing back-office functions.
Telenor, which began accumulating its stake in Uninor in 2009, now owns 67.25 per cent of the venture, which it said in February it spent Rs 6120 crore ($1.3 billion) to acquire from Unitech.
Although it can legally own up to 74 per cent, it doesn't intend to raise its stake, Telenor spokesman Glenn Mandelid said by an e-mail.
The India operations remain a drain on Telenor, which saw profits increase in the second quarter on growth in Malaysia and Thailand and from its Russian mobile-phone joint venture VimpelCom Ltd.
Telenor has risen 16 per cent this year in Oslo, making it the seventh best-performing stock in the 33-member Bloomberg Europe Telecommunications Index.
Andrew Hogley, a London-based analyst at Execution Noble, said if Telenor were to quit the Indian market, he would add 15 to 20 kroner to his fair-value estimate of 90 kroner a share. Telenor currently trades at about 95 kroner.
"The market may be getting a bit too optimistic that they may walk away from the project, which isn’t just backed by management, it’s backed by the largest shareholder which is the Norwegian government," Hogley said.
The government is more interested in the company's long- term strategic position and is prepared to carry losses for many years, he said.
Norway's Ministry of Trade and Industry manages the government's 54 per cent share of Telenor. The ministry wants deeper ties and trade with India as demand for energy and consumer goods grow in Asia's third-largest economy, State Secretary Rikke Lind said in an interview last year.
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