Telecom service provider Telenor Group, which has a big participation here at the Mobile World Congress 2015, is focussed around saying how digital connectivity can help world to get closer. And, for that there should be more digital inclusion awareness, fairly priced spectrum, local content and smartphones below $40. Apart from being active around the world, the company has also a big focus around Asia Pacific, including India. In an interview with Business Line , Sigve Brekke, Executive Vice President and Head of region Asia, Telenor Group talks more. Excerpts from the interview:
Are you satisfied with Telenor’s performance in Asian markets? How does India market compare with other Asia markets? How do you see Uninor growing in 2015? What are the investments planned for this year?
2014 was a good year for Telenor across its Asian markets. Our India arm Uninor reported growth of 38 per cent in gross revenue and added over 10 million new subscribers to cross the 42 million mark. From being Sabse Sasta on voice only, we expanded our product portfolio to offer Sabse Sasta Internet Services with hourly, daily, weekly and monthly packs on Internet services like Facebook and WhatsApp. This was a paradigm shift in how the industry offers internet services. We also made investments to add 5,000 new sites in the existing circles and complemented this by equal expansion in retail distribution.
In 2015, we are confident of a good growth trajectory similar to 2014 both on voice and internet services. We will focus on continuous improvement on the network side and on offering relevant services to our mass market consumer. We also have the new circle of Assam which we are planning to launch this year.
You have recently begun operations in Myanmar? How has been the progress so far? What have been some of the challenges?
Myanmar is perhaps the last greenfield telecom opportunity in the world. It has been a closed economy for several decades and its telecom infrastructure has been underdeveloped. Hence, setting up operations in the market is challenging. However, we progressed well on our execution plan after getting our licence and launched our services in September 2014.
The success of Myanmar can be attributed to our learning from the challenges faced by our operations in India and other markets in Asia. The business model for Myanmar is similar to the one in India – mass market brand focused on a three-pillar strategy of Best in Basics, Best on Mass market distribution and low cost operations. To implement this model we had to pick from our experienced talent pool at Uninor and other Telenor operations globally. At Uninor, they understand how a distribution system needs to cater to the demands of mass market. They are willing to work in a challenging market like Myanmar and recreate the success there. In 2009, Uninor was built from nothing. Now we are doing the same in Myanmar. The only difference is that while in India we were a late entrant, in Myanmar we are the among the first two private telecom operators. The team comprises people from 16 different nationalities - working together to deliver telecom services to the people of Myanmar.
When we started operations in September last year, the telecom density of Myanmar was less than 10 per cent (now around 11 per cent). We currently service three cities Yangon, Mandalay and Myanmar’s new capital Nay Pyi Taw. We ended 2014 with 1,050 base stations and 3.4 million customers.
You plan to invest Rs 500 crore this year in India. In which areas of operations do you plan to invest the same?
We continue to invest in our business operations to build and enhance our service quality with a sharp focus on profitable operations. Our business model is created to ensure that we remain the lowest tariff provider in the coming years.
You have completed expansion of your 5,000 new sites in India? Which are the areas that will benefit most from this expansion?
Uninor has shown a strong growth in subscriber base as well as revenues since winning back licences in the six circles. Last year, we executed the largest network expansion by adding 5,000 new sites in the existing operating circles and complemented this by equal expansion in retail distribution. These sites were almost equally distributed and increased our network penetration by about 30 per cent in each of our operating circles.
By when do you plan to launch your services in Assam?
Assam will be commercially launched later this year. We already have a team on the ground who is working on setting up operations.
Do you plan to acquire any more circles? Pan India operations...
Our current set of operating circles allows us to serve over 50 per cent of India’s population. In addition to this, the India market is highly under-served especially in the rural areas. Our assessment is that India’s mobile penetration is around 60-65% especially due to multi-sim devices in demand even in semi urban India. This is a huge opportunity and we have seen good momentum on growth across our circles. In some of our best performing circles we are already at the number 3 position in subscriber base and number 4 in revenue share.
How do you see competition from Reliance Jio? It is expected that Jio will bring in disruptive competition in the data space.
Mass market, basic services, low cost and low tariff gives us an opportunity to stay relevant and appeal to our customers. In this space, we have competed successfully at a time when each circle had over 13 operators. We welcome competition as it pushes you to innovate and think of disruptive, new ways of working.
When will you look to offer 3G or 4G? Business case for Telenor with only pre-paid voice and basic internet in 6 circles? When do you plan to launch 4G using 1800 MHz?
Currently, our focus is on basic services. Beyond voice, this means basic Internet services like browsing, email, Facebook, WhatsApp.
The mass-market consumer is not concerned about the technology. The mass market needs reliable Internet for their kind of usage at the most affordable tariffs. Today, the majority of the mass-market usage is served better with affordable tariffs using the 2G/EDGE platform. India continues to be a high growth market, second only to China in terms of mobile connections and unique subscribers.
The data opportunity and data potential is undeniable. Much like with voice, in data too we see tremendous potential for basic services. This is the segment that will truly explode. The semi urban and rural internet penetration is growing much faster than in big cities enabled by the availability of advanced feature phones and cheap smart phones. This is the segment we are targeting and they are happy consuming internet services through packs like Re 1 for an hour of Facebook and WhatsApp. This is our current focus.
Having said that, I would also like to add that we will not remain a 2G provider forever. We will explore high-end services as and when there is a need. We are already investing in technology that is future ready. We have expertise in the group on enabling 4G in most of our European markets and are leveraging our strength to build that in Asia.
What kind of participation would you have in spectrum auctions?
We have already shown our intent to participate in the auctions as we filed the NIA application with DoT.
Is Telenor looking to acquire other companies in India? Talks about acquiring Tata Tele have been on for a while now?
We do not comment on market speculation.
Uninor has applied for a payment bank licence to offer financial services in India? How do you see operating in India market. What are your plans?
Telenor has partnered with IDFC and another financial investor to apply for a payment banking licence in India. Together with our two partners we are keen to build services in mobile payment bank space and help the unconnected population benefit from financial inclusion. Our global experience of running successful financial services such as s Mobicash are good examples of how we have brought banking services to the unbanked in developing economies in Asia.
Uninor is a 100 per cent subsidiary of Telenor Group in India now, are you planning for a name change to Telenor?
Uninor is now a 100 per cent subsidiary of Telenor Group and is operating under the registered entity Telewings Communications. Our customers in India recognise us as Uninor and choose us for the value we bring through the most affordable pricing on voice and Internet services. Currently, we see no immediate need to change the name.
How important is India market for you? You also invest cautiously in India. What is the reason?
Telenor Group is pleased with the performance of Uninor. The passionate Uninor team is a source of inspiration for the other operations in Telenor Group.
As a principle, Telenor Group believes in profitable growth. In 2015, we see a good growth trajectory and will to invest in building infrastructure to meet the market needs and achieve profitable growth.
Are you happy with the M&A policy in India? What changes would you like to see?
Though M&A guidelines have been announced, further clarity is required for its practical implementation.
How is your experience in other countries as compared to India?
It is not possible to compare markets – as they are all uniquely different beyond certain universal characteristics.
How do you see threat from over the top (OTT) players like Facebook and Google?
OTTs are part of the Internet services ecosystem and one of the key drivers for data adoption. However, they are dependent on telecom operators to take their services to the end users. We have created a good partnership model with Facebook, Whatsapp, Line and others across markets. It has been a win-win model where the user gets relevant services at affordable rate while our OTT partners are able to take their services to the masses. But we also realise that the market is evolving and customer demands are changing. We need to continuously innovate to stay ahead in the game.
Is India’s spectrum usage similar to other countries? How are other countries utilising spectrum to the fullest?
Many countries have a spectrum road map. This provides clarity of spectrum auctions, times for availability and specific bands, reframing, sharing and trading. This brings predictability in the system and allows for better business planning. While pricing and method of spectrum allocation can be debated, the key point here is that no other market is as competitive as India and quantum of allocated as well as available spectrum is putting pressure on operators. A spectrum roadmap will help India drive tele-density and contribute to achieving the Digital India vision.
How are the companies driving economies of those countries?
A GSMA report indicates that the mobile industry (both directly and indirectly) contributed around 3.6% of global gross domestic product (GDP) in 2013, equivalent to over US$ 2.4 trillion. This figure is expected to increase to 5.1% of global GDP by 2020. In addition, there are 10.5 million jobs supported directly by the mobile ecosystem across the world, while the mobile ecosystem contributed over US$ 336 billion in public funding in 2013, even before considering regulatory and spectrum fees. In India as per industry estimates, the telecom sector contributed 6.9 per cent of GDP in 2012-13 providing employment to more than 5.7 lakh employees. As the tele-density grows and more investments flow into the sector, the contribution of telecom sector to the economy is only going to increase.
As machine to machine (M2M) and Internet of things (IoT) are also picking up in India, what will be Telenor’s role in such field?
Telenor has been a pioneer in M2M technologies since the late 1990s and believes that in near future billions of devices will connect to mobile networks. The Internet of Things is gaining traction globally with Europe and Americas taking the lead in adoption and Asian countries catching up fast. Through its wholly owned company Telenor Connexion, TG is working on smart, cost-effective and innovative M2 solutions. The success of M2M or IoT will partly depend on the amount of spectrum available and the demand for such services. As and when India is ready Telenor will explore the possibility of extending its M2M and IoT services.