Business

Tuesday January 1, 2013

Telenor a growth company


Asian operations help company expand revenue despite eurozone crisis

Below are the excerpts of the interview with Jon Fredrik Baksaas, the CEO of Telenor ASA:

Your take on DiGi and Telenor's Asian operations?

DiGi has been an impressive performer for the Telenor group for many years and investors in the Telenor group see DiGi as a strong company and strong contributor to group performance. DiGi has delivered quite a lot of innovation and new elements to the Malaysian marketplace over these years and we have contributed to the development of DiGi, which in turn has contributed to Telenor.

We enjoy roughly 40%-45% of revenue from the Asian region, and about 25% is from our home market, which is Norway. As opposed to telcos in Europe, Telenor is a growth company because of its Asian position.

European companies on the overall lost revenue by 6% in the last quarter, which is quite a dramatic figure as it is topline revenue and that is a reflection of the rather bleak economic environment in many European countries for the time being.

Telenor, on the contrary, has 3%-5% growth factor on the top because of its strong position in Asia and Norway. There is strong economic growth in Norway.

How much of spending is needed in upgrade for 4G?

I don't have details but capex spend in an industry like this would probably move between 8% and 15% of annual revenue in a matured, running business. The new way of doing things is to share networks and infrastructure. How much can companies save?

Initially, all operators spend on everything and not share resources. But as the industry matures and with new technologies, the sharing concept comes to play. It can be sharing of towers to infrastructure and it also depends on how many players are there in the market.

What we see in Denmark where there is 3G and 4G, the capex reduction by each party is 30%-40%. But Denmark is a special country as it is pretty small, flat, easy to cover, there are four players, it is highly competitive, and in a way the operators are forced to find new solutions.

The sharing principle is much more widely used in other markets than Malaysia and if this is handled smartly, it offers new efficiency to the market and the consequences is, better services to consumers.

Often it has been said that the dividends from DiGi is used to fund Telenor's expansion into other markets such as India. Your comments?

I hear that in Norway also, some say you need the money from Norway to invest in India or lose it in India.

The truth is, our international investments take care of themselves. We allocate capital to those markets in which we can have a sustainable long-term industrial and strategic position.

Malaysia and DiGi is such a place. So DiGi has never been in lack of capital and none of our operating companies have lack of capital. All capital allocation needs to be supported by profitability, so every ringgit invested needs to be substantiated by a business case behind it. What is Telenor's position in India?

It has not been a walk in the park but we have found sufficient ways to bid for a new spectrum and we are now focusing solely to move from where we are today and to break even in 2013. From then onwards, the flexibility will be quite different. We also have a new partner in new combination. Can Telenor win in Myanmar?

It is underleveraged when comes to telecom services and obviously telecoms infrastructure is needed and in that respect, Telenor has 15-plus years of experience in similar settings and cultures and we see possibilities in Myanmar.

With our code of conduct and operational model, we can have a positive effect in the years to come ... it is up to the decision makers there.

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