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Telenor forced to rethink its India move

Telenor, Norway’s leading telecoms operator, is considering abandoning a NKr12bn ($1.8bn) rights issue that is supposed to fund much of its expansion into India because of investor opposition.

Jon Fredrik Baksaas, Telenor’s chief executive, told the Financial Times the company was looking at alternatives to a rights issue that some shareholders had put forward.

He said these included cutting dividends, selling assets or reducing capital spending.

Telenor’s share price fell 26 per cent last Wednesday, after it unveiled plans to pay $1.1bn for a 60 per cent stake in Unitech Wireless, a new Indian mobile phone operator that is aiming to start services in the middle of 2009.

Unitech requires capital spending of $2bn over the next three years to roll out a mobile network from scratch, and Telenor does not expect the Indian operator to break even at the level of earnings before interest, tax, depreciation and amortisation until 2012.

Shares in Telenor, which has a market capitalisation of NKr68bn, have fallen 70 per cent this year on investor concerns about its performance.

As well as its presence in Scandinavia, it is a leading mobile operator in emerging markets across eastern Europe and Asia, and has 159m customers.

In July, Telenor cut its revenue guidance because growth at some of its Asian mobile businesses was curbed by the deteriorating economic environment.

The Norwegian government owns 54 per cent of Telenor, with the remainder held by shareholders spread across Scandinavia, western Europe and the US.

Mr Baksaas made no commitment to abandoning the rights issue, but said he would consider alternatives. “There is consistent feedback from minority shareholders that in the present circumstances of the financial markets and the low valuation of Telenor, a rights issue at this point in time hurts.”

He said the rights issue had been deemed necessary to protect Telenor’s investment-grade credit rating.

Industry analysts at Credit Suisse last week estimated that Telenor’s earnings per share could fall 40-45 per cent in 2009 and 2010 because of the dilutive effect of the rights issue and Unitech’s estimated operating spending. Mr Baksaas declined to disclose Unitech’s operating spending.

Analysts have also questioned Telenor’s move into India, because the country already has three established large mobile operators. These are India’s Bharti Airtel and Reliance Communications and Vodafone of the UK.

Mr Baksaas defended the move and pointed to Pakistan, where Telenor developed its Pakistani mobile business from scratch in 2004 to become the country’s second-largest wireless operator. He said Telenor’s Indian move was a long-term means of increasing the company’s growth profile, given that only 25 per cent of the country’s population owns a mobile.

Источник: Financial Times

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