Telenor used its Q2 results to declare it will not participate in India’s upcoming spectrum auction, heightening rumours that it could be set to exit the market.
In the results statement, Telenor said that, after thorough consideration, it had “decided not to participate in the upcoming spectrum auction, as we believe the proposed spectrum prices do not give an acceptable level of return”.
The auction, likely to be held in September and including the sale of the lucrative 700MHz band, is being touted as the country’s largest ever, with initial reports suggesting it could raise a mammoth INR5.6 trillion ($85 billion).
India’s third largest player, Vodafone India, was this month linked with a move to acquire Telenor’s India unit, which has 54 million mobile connections but no 3G or 4G coverage, and today’s news will no doubt fuel rumours about the Nordic company’s future involvement in the market.
Telenor added that as it evaluates its options in India, “we will be disciplined on capex”.
Meanwhile, according to a Reuters report, CEO Sigve Brekke said the operator aims to find a long-term solution for its India business “as soon as possible.”
“We need more spectrum in India to be able to compete in the data segment and that solution we don’t have. That is why I am saying we need to consider all different options. What those options may be in a very dynamic market, I don’t want to speculate on what,” he added.
Net profit drops
Within the financials, the company posted a sharp drop in net income, which declined by almost two thirds to reach NOK1.11 billion ($130 million), down from NOK3.5 billion a year ago.
This, it said, was impacted by low device sales, while it also felt the impact of an impairment charge in VimpelCom, which was embroiled in a bribery scandal over licences in Uzbekistan.
Telenor, which is trying to divest its 33 per cent stake in the company, added that “VimpelCom will continue to be classified as an associated company, until it is highly probable that a sale within 12 months will occur”.
Sales in Q2 were however slightly higher year-on-year, with revenue hitting NOK32.5 billion, compared to NOK31.4 billion in the year prior, as CEO Brekke put a focus on strengthening the company’s data position across its footprint.
He said the company sees “encouraging signs of data monetisation in several of our markets. Digitising our core business, combined with efficiency measures, will be key to drive value creation going forward”.
To that end, the company said it plans to spend more than NOK4 billion in its home market Norway in 2016 on both fixed and mobile networks, while the decision to remove roaming barriers there, Denmark and Sweden was leading to an uptick on new tariffs, despite “impacting our roaming revenues and costs in the short term”.
Despite uncertainty in India, the company said the market saw strong revenue growth, along with its operations in Pakistan, where it has just expanded with 3G, and Bangladesh.
India saw a 13 per cent revenue growth in Q2 compared to last year, while Bangladesh and Pakistan grew at similar rates.
Based on its first half performance for the year, the company lowered its full year guidance, with organic revenue growth expected to range from 1-2 per cent, down from 3-4 per cent.