After years of heavy losses and regulatory conflicts, Norway’s large telecoms firm Telenor has finally pulled the plug on its operations in India. Its deal to sell long-troubled Telenor India to Bharti Airtel, at a stunning loss of NOK 25 million, was “the best we could manage,” claimed Telenor’s embattled chief executive Sigve Brekke.
“Of course we hoped we could do better,” Brekke told newspaper Dagens Næringsliv (DN) on the phone from New Delhi after Telenor announced the sale Thursday morning following months of speculation. “We were only certain this deal would come together this morning, even though we’ve been in talks for a while.”
Under terms of the deal, Airtel will take over Telenor’s licenses, mobile frequencies, operations, employees and 44 million customers, with no payment to Telenor. “But they also take over the obligations we have here,” Brekke told Norwegian Broadcasting (NRK), at no charge. That’s worth something to Telenor, which now seems most keen to cut its losses and run.
Latest crisis for Brekke
Brekke was the top Telenor executive who led the company’s ill-fated expansion into India and headed its Indian and Asian operations before becoming Telenor’s CEO last year. Since then he’s battled a string of problems at Telenor, from the fallout over its corruption-tainted VimpelCom unit to a lack of confidence from new leader of Telenor’s board and more in between. The problems in India, though, have been perhaps the biggest blemish on his record, and the most expensive.
Brekke candidly admitted to Norwegian media that the losses have since piled up to an estimated NOK 25 billion (USD 3 billion), when taking into account both Telenor’s investment in India and operations. Telenor had been duly warned against the venture by both shareholders and analysts, but forged ahead anyway.
Brekke defends himself and the company by claiming that it’s easy to see the problems in hindsight and that Telenor wound up with “three things against us that we couldn’t see in advance.” They included competition that “showed itself to be much tougher and much more brutal that we had expected.” Average earnings per customer fell dramatically, while the regulatory framework “also became demanding,” Brekke told DN. So demanding that Norwegian government ministers got directly involved and Telenor’s excursion into India became a national political issue.
‘Not sustainable’ but ‘learned a lot’
The regulatory challenges involved Telenor’s so-called “spectrum” in India that’s critical for telecom firms’ coverage and capacity in a mobile phone network. It and the licenses needed also became much more expensive. Brekke himself was in charge when Telenor lost licenses to operate its mobile operation in the winter of 2012, after a high court decision. Since taking over as CEO, Brekke stated clearly that a “sustainable solution” had to be found for Telenor’s Indian operation, and that resulted in the sale to AirTel.
“We saw a year-and-a-half ago that the model we had in India was not sustainable in the long term,” Brekke told DN, which has followed Telenor closely for years.
Asked how it feels to lose around NOK 25 billion in India, Brekke said that “of course we hoped it would go better. At the same time we take with us the positive things we have learned in India. Much of the success we’ve had in Myanmar is tied to what we learned in India.”
He said it was “no easy decision” to sell off at such a loss, but called it a “financially rational decision.” He also claimed on social media that the sale is “in the best interests of customers, employees and Telenor.”
It appeared to also be in the best interests of shareholders, based on trading of Telenor shares on Thursday. Telenor’s shares had jumped last month, from around NOK 129 to 135 on reports in India’s Economic Times that Telenor was close to a deal with Bharti Airtel. On Thursday, shares remained stable at NOK 135.80 at midday.
newsinenglish.no/Nina Berglund
