Today's Comment: Telenor warns on future in India.
- Like other groups, Telenor has said that the proposed prices for 2G spectrum are excessive.
- The group may exit India and instead seek compensation if the DoT does not reassess TRAI's recommendations.
Telenor has raised the stakes in India:
- Telenor has raised the prospect of exiting the Indian market.
- In a statement, the group said that the planned 1,800-MHz auction in its current form is "almost impossible" to participate in.
- The group said that it will write down the remaining value of its fixed and intangible assets in India in its first-quarter 2012 results. It added that after the first quarter it will no longer have accounting exposure to India.
This is the starkest warning yet by Telenor on its future in India. Like the GSMA and other operators, it is arguing that the proposed prices of 2G bandwidth in the planned auctions are excessive and will inhibit future investment. The Norwegian group will be lobbying the DoT, which has the final say on 2G auction rules, to lower the proposed prices and proceed with the auctions as soon as possible. It has previously warned that it will instigate international arbitration for compensation related to the cancellation of 22 licences if auctions do not proceed before the end of August 2012.
To date, the group has invested USD3 billion in India. If it feels that the DoT will not budge on the planned re-entry costs, it will seek compensation rather than attempt to remain in the market. The current regulatory limbo puts Telenor and other losers of 2G spectrum at risk of growing levels of customer churn to rivals. We hope that DoT will take an enlightened view: that lowering the costs of 2G and other spectrum will be in the long-term benefit of the sector and the broader economy. However, the government is facing great pressure to lower the fiscal deficit through short-term measures, including the possible levying of retrospective taxation on Vodafone. The latter has also warned that the plans to refarm 900-MHz spectrum and award current 900-MHz licence holders with 1,800-MHz spectrum when their permits mature is "legally flawed".
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