Telenor restructures Indian unit ahead of auction
By Balazs Koranyi and Joachim Dagenborg
OSLO (Reuters) - Norwegian mobile phone operator Telenor ASA (TEL.OL: Quote) plans to cut 2,000 jobs in India as part of a cost-cutting drive that some analysts saw as a signal it will stay in the country despite recent regulatory problems.
Telenor, which threatened to exit India after it lost its licenses in an industry-wide corruption probe, plans to reallocate resources to more profitable regions in India and brought forward by a year and a half the break-even point for a unit that has never turned a profit.
"By doing this, we believe that we can make (Indian unit) Uninor self-financing, that means cash-flow break-even, within the end of 2013," Chief Executive Jon Fredrik Baksaas said. "In the previous business plan, this target was the first half of 2015."
However, Telenor - which has more than 150 million subscribers across Europe and Asia - would only take part in a new licensing process, expected in late August, if it stayed within its self-imposed 155 billion Indian rupee ($2.8 billion) funding cap, Baksaas added.
Uninor is among eight carriers set to lose a total 122 zonal permits in September, after a Supreme Court order to revoke all licenses granted in a scandal-tainted 2008 sale.
Still, analysts said the restructuring plans represent a subtle shift in Telenor's approach, as a restructuring indicates the company is planning for the long haul rather than getting ready to leave.
"We think Telenor's language signals its intentions at the upcoming auctions," Nomura said in a note to clients.
"We expect this be well received by investors as it helps to reduce the uncertainty for potential outcomes from the auction process," Nomura analysts said. "Expectations may even start to rise that India might hit EBITDA break even ahead of plan." Continued...