Low tariffs hitting telcos’ bottom line: Uninor chief

Says India is a great telecom market; but the sector needs more spectrum, investments

We, the Indians, are lucky at least on one count. We pay lowest charges in the world on every mobile call we make. This amply reflects in the phenomenal growth of mobile subscriber base which has reached a tad above 95 crore now. Though we as mobile users are happy about this, the telecom companies which allow us to enjoy the talk time are no so ecstatic because none of them is making any profits despite being in business for over decade. “If you look at the call prices, they are very low. So, I think the intense competition has taken away lots of profits from the industry,” Morten Karlsen Sorby, CEO, Uninor, tells
P Madhusudhan Reddy in an exclusive interview. Uninor, a part of Norway’s Telenor Group, forayed into India in 2009 and currently operates in six telecom circles including AP and Telangana. Though its subscriber base has reached 42 million now, the telecom operator is yet to churn out profits for its Norwegian parent. Its accumulated losses reportedly stood at Rs 14,300 crore in December 2013.

As you are aware, mobile telecom industry is almost two decades old in the country. But none of the companies is making profits till now. Is there any special reason for this?
I think it’s fair to say that Indian telecom market is the most competitive one in the world. Competition takes different flavours. But if you look into the call prices, they are very low. So, I think the intense competition has taken away lots of profits from the industry. We have seen some improvements in the past one year or so. If you look at the kind of investments that are made into the telecom industry here and investments that are to be made, the profitability is not on par with other markets.

How long does it take for the telecom industry to churn out some profits for the owners?
Telecom companies have got 2G and 3G licences in 2010. But the services began on a slow note initially. However, we have seen good traction in the past two years thanks to increase in device penetration across the country. When the affordable devices started to come, services really picked up. Same thing will happen with 4G. I think the transition towards data, which will generate good revenues, will continue for next five years. However, we hope to generate profits before that because it is the profits which will have to fund the expansion. It is very important to understand that there will be no funds for expansion if there are no profits.

What kind of additional investments the industry needs in long run?
The operators will need more spectrum than what is available as of today. Also the sector needs huge investments, but I can’t quantify them now. First, we need spectrum. The problem today is that there is no much spectrum available with the government too. Government needs to create more spectrum for telecom operators by tapping the huge spectrum allocated for defence and government agencies. Some of that spectrum should be made available for the operators. This is very important to achieve the Digital India initiative announced by the new government. That spectrum will obviously be auctioned and so it will come at a cost for us. Secondly, we need to invest into new technologies and create new capacities in 3G and 4G. For that, operators need to create more and more new base stations. Thirdly, we need enhancement in backbone or transmission capacity. All the operators need to enhance their capabilities. Operators have so far made more investments into radio waves. Now, we need to aggregate new technologies with old ones and that exercise will require huge investments.

What are the key differences between Indian telecom market and those in developed countries such as Norway?
Probably, the price levels are the key difference between India and other markets. Indian tariffs are very different from Europe. Then, of course, the number of customers the country has. Except for China, we don’t find a market place which is as big as India. That’s the real factor here. We need to establish profitable operations here because it is a huge market. India’s demographics are very promising as well. Competitive landscape, pricing levels and sheer size of the market are key elements here.

Do you see tariffs going up to a level where operators can turn their companies into profitable ventures?
That’s really difficult question to answer. But, at Uninor, we will also continue with our Sabse Sasta strategy. There are two ways of increasing revenues. The first one is to increase prices and second one is to increase the consumption. We are of strong belief that consumption of data will increase dramatically. Though we are driving the market for data, the demand is also coming from customers as well.

You are present in six circles only as of now. Will it work out for you in the long run if you don’t have a pan India presence?
Currently, we operate in six circles. Besides, we also have Assam where we will launch our services in near future. These account for more than 600 million people. You don’t find such a large market anywhere outside China. We will concentrate on what we have. When opportunity comes up, we will look at other circles, see whether can make profits there and then move forward.