Newsmaker: Sigve Brekke

Stuck between a rock and a hard place

Do you know what it’s like for your child to suddenly and swiftly be whisked away from you by the state authorities?

If you do, then that’s pretty much what Sigve Brekke must be feeling when on February 2 the Supreme Court went ahead and cancelled 122 telecom licences, including 22 of Uninor’s, linking them to a corruption-plagued process through which 2G, or second generation, airwaves were handed out to nine new companies in 2008.

To add salt to Brekke’s wounds, the telecom regulatory authority (Trai) on April 23 of this year suggested a base price of Rs 3,622 crore per megahertz of spectrum (in 1,800Mhz bandwidth) in fresh auctions to be conducted by August 31 2012—ten times higher than the price of 2G licences that were allocated in 2008 at Rs 1,658 crore per megahertz of spectrum (bundled with 4.4Mhz of spectrum).

 

For Brekke, who moved from Thailand to India to become managing director of the joint venture between Norway's largest telecom company Telenor and Gurgaon-based real estate company Unitech in November 2010, this must have come as a hammer blow. The company has ploughed a significant amount of money in India—over Rs 14,000 crore of it—employed 17,500 people and managed to attract 42.4 million customers in a little over a year.

Yet, not so long ago, in 2010, Uninor was desperate for customers and fighting for survival in a cut-throat market with well-established leviathans such as Airtel. With more than ten such rivals to compete with, Brekke knew that he needed to differentiate himself from the competition quickly. He, therefore, decided to deep-six a focus on post-paid customers as well as value-added services and instead began concentrating on the bottom of the telecom pyramid. Since telecom tariffs were already very low, he essentially carved out a whole new bottom for Telenor—filled with those who had the least purchasing power.

Today, some seventeen years after its inception, Airtel is the undisputed leader in the telecom market in India with 27.3 per cent share and 181.2 million subscribers at end of March (according to figures by Cellular Operators association of India). Of those who entered the market with Uninor—Videocon’s Datacom, STel, Loop Telecom and Etisalat—every company individually has less than one per cent of the market. Uninor’s share, however, is at 6.39 per cent. What’s more, in the three out of six months leading up to February this year, Uninor has attracted the most subscribers. In the other three months, Idea Cellular was ahead by just a nose. Now, all of this may come undone.

Brekke, however, is no pushover and not inclined to fold so easily. “I am leading the troops, we are all in a very competitive war and then the generals need to be out with their soldiers,” he said in an interview recently. And out there he is—an exception amongst corporate leaders, much like baggage-handling Tony Fernandes of Air Asia or in-flight meals-serving Herb Kelleher of Southwest Airlines. He is most often seen marshalling his employees on roadshows, travelling to remote towns and mingling with dealers and customers alike—even now, despite the cancellation of his licenses. Recently, on one such event in Chennai, he grabbed a drum and started dancing to a variety of Tamil songs, including Kolaveri di.

This isn’t the image that comes to mind when you think of the deputy minister of defence of Norway, which Brekke was, in 1993. He holds a master’s in public administration from John F Kennedy School of Government, Harvard University, a bachelor’s degree in management from Norwegian School of Management, Buskerud, and a bachelor’s in business and administration from the Telemark College, Norway. Brekke joined the ranks of Telenor in Singapore in 1999 and quickly rose to the level of managing director.

Brekke’s credentials, as a former politician and a businessman, will be put to rigorous test in trying to salvage the best possible way out for his thriving but ironically beleaguered company. Apparently, meetings between the Indian and Norwegian prime ministers were initiated in March in Korea. Then, a few weeks ago, Norway’s trade minister also met finance minister Pranab Mukherjee to figure out a solution. If nothing comes of this, Telenor always has the option to force the government into arbitration under the Comprehensive Economic Co-operation Agreement with Singapore, the country that acts as a conduit for its investments.

Meanwhile, Brekke has his hands full with trying to evict its partner Unitech, which has a 32.75 per cent equity in the venture. Telenor approached the Company Law Board which rejected its plea, throwing the case into international arbitration. That, however, does nothing to ease the pain of the upcoming auctions, which could be financially debilitating for Telenor. "If these recommendations become policy, then the Government of India will be forcing Telenor Group to exit. It will be almost impossible for us to participate in the upcoming auctions," said Brekke, in a statement in reaction to the Trai verdict. He told another group of reporters that “There is no Plan B in place for even our employees,” he told Business Standard earlier.

Brekke, therefore, is stuck in a precarious position, somewhere between a rock and a hard place. India makes up 30 per cent of Telenor’s Asia subscribers and close to ten percent of its revenues. It is not easy to eject from one of the most valuable and fastest growing telecom markets in the world, one in which you’ve already made considerable gains.

If Telenor were to stay on, however, other issues persist—the main one being, can it afford to keep on trucking with its low-margin, high-volume business model if it has any hopes of making money in India (Brekke said that the company would break even in 2013)? It’s a double-edged sword since moving to value-added services would also mean endangering the approach that led to its success in the first place.

Right now, however, this must be a concern for Brekke that is as remote as Norway is to Indians. His fundamental preoccupation will be on how to continue to stay inside the telecom ring without haemorrhaging from the deep cuts he may have to sustain while paying for new licences.

It’s not an enviable position to be in.