Losses force Telenor to shun India

Norway’s Telenor distanced itself further from the Indian market on Tuesday, excluding the country from its 2012 forecasts for the first time after licensing problems there led to massive writedowns that weighed on its quarterly results.

State-controlled Telenor posted a quarterly net loss of 390 million crown including minority interests after writing off the remaining 3.9 billion crown value of its Indian unit Uninor. That compared with a profit of 3 billion a year earlier.

The group’s troubles in India contrasted with improvements in several key markets that had been struggling with margin pressure. The Supreme Court, earlier this year, ordered the cancellation of 122 telecoms licences after a corruption-tainted licensing round. The proposed fee for a replacement licence is prohibitively high.

“This fee package will make it almost impossible for incumbents like Telenor to stay in India,” Telenor Chief Executive Jon Fredrik Baksaas said.

Analysts have welcomed Telenor’s possible exit as the low-margin market has been a drag on the firm’s earnings for years, and winding up the operation would be a short-term boost to both earnings and the stock.

“When they exclude India from their guidance, that’s a clear signal that unless something changes, they’ll exit,” Carnegie analyst Espen Torgersen said, adding, “On the operations, it’s difficult to imagine a more ‘in line’ result.”

Telenor’s EBITDA, which exclude the one-off India charge, rose 2.9 per cent to 7.62 billion crowns, coming in not far from forecasts for 7.79 billion crowns. In Norway, where Telenor had earlier struggled with margin pressure, operations improved, while some of its Asian operations were also above forecasts, analysts said.

Still, the company’s outlook will be uncertain until its troubles in India, and to a lesser extent in Russia, are resolved.

“We remain positive on Telenor’s operations; however we still have concerns that the market is too optimistic on India and Vimpelcom, where we see a risk of negative news flow in the short term,” Citi said.

In Russia, the anti-trust regulator has sought to overturn Telenor’s recent purchase of shares in mobile operator Vimpelcom, charging the group acted illegally.