'Telenor may quit India if Trai hikes 2G spectrum fee'


2 May 2011
Reaction score
OSLO: Telenor will likely quit India rather than pay a much higher price for spectrum, analysts said, with the Norwegian telecoms group seen benefiting from any scaling back of its presence in a low-margin market needing a big investment.

The minimum price for an auction of 2G spectrum, announced on Monday, could push Telenor's prospective costs well beyond its limit, leaving an exit as the only viable choice, analysts said on Tuesday.

"It is now highly unlikely Telenor will bid for a nationwide licence (in India), in our view, with the most likely course of action a significant scale-back or a complete exit, both of which would be positive for valuation," UBS analysts said in a note to clients.

On Monday, the Telecom regulator proposed a near-tenfold increase in the price of 2G spectrum.

Players in India's telecoms market, the world's second-biggest by users with over 900 million subscribers, have been battered by ferocious competition and the 2G spectrum scam.

The Supreme Court has ordered 122 permits granted to eight operators in a 2008 sale be revoked in June, and asked the government to redistribute spectrum through an open bidding process.

Telenor, which has over 30 million subscriptions in India among 140 million worldwide, has committed to invest a total of $3 billion in Asia's third-largest economy and with two thirds of that already spent the raised fee would push it above the cap, USB said.

Nordea analysts said: "An exit from India would raise 2012 EBITDA and EPS by 6 pe cent and 20 per cent respectively. The risk to Telenor would also be reduced".

Based on forecast 2013 earnings, Telenor shares trade 15 percent below peers, they said.

Telenor shares were up 1.1 per cent at 1030 GMT, in line with a European telecoms index.

On Tuesday, India's Supreme Court asked the government to conduct the new 2G auction by Aug. 31, a delay of several months from an original schedule, giving telecoms firms more time to prepare and raising the prospect a compromise may be struck.

Telenor, which welcomed the delay, said the price proposal was a "major negative" for the entire sector.

Citi said India remained a source of major uncertainty and cautioned against jumping on the stock.

"We remain concerned that the market is assuming an exit from India, while this is not assured. The recommendations do increase the probability of an exit, in our view," Citi said.

Top Bottom
AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock