Uninor to raise over Rs 9,000 cr debt

Despite mounting losses from its Indian operations and growing pressure from minority stakeholders back home, Norwegian telecom major Telenor said Uninor, its telecom joint venture in India, plans to raise about Rs 9,365 crore to support its expansion. The money would be raised over the next few years through debt, as the company did not intend to bring in fresh equity, Sigve Brekke, MD of Uninor India and executive vice-president of Telenor Group, said.

"We need a peak funding of Rs 1,55,000 crore to run the company in India. The initial equity of Rs 6,135.63 crore came from Telenor, by which it acquired 67.25 per cent ownership (in Uninor). That funding has been enough till today. However, Telenor has no plan to bring in additional equity, and the rest of the money needed to run the company until we become cash flow-positive will be through project financing," Brekke said.

Telenor, which owns five companies in Asia, including in Bangladesh, Thailand and Pakistan, launched its mobile services in India on December 3, 2009, through a joint venture with Ramesh Chandra-controlled Unitech Group. The company, so far, operates in eight telecom circles, with a subscriber base of 10 million. It is, however, under increasing pressure from investors in Norway owing to the mounting losses, expected to have crossed $340 million (approximately Rs 1,500 crore).

Brekke said the company was in talks with banks to raise this debt and did not see any issue in raising its debt. He said the company had already convinced its shareholders in Norway and was optimistic of raising the funds, which would be helpful in meeting future operational expenses.

In 2009, Uninor had a negative cash flow of Rs 3,500 crore and, in 2010, it was expected to be in the range of Rs 4,500-5,500 crore. In the three-year period during 2011-13, the company plans to bring down the aggregate negative cash flow to Rs 6,500-7,500 crore by cutting expenses and increasing revenues. "Our plan is to become Ebitda (earnings before interest, taxes, depreciation and amortisation)— positive in three years and cash flow-positive in the next five years," added Brekke.

Uninor recently changed its strategy in India by targeting the mass market, launching a dynamic pricing strategy and packaging products differently. The company said the dynamic pricing – which aims at giving a discount to users in real time, based on the load on the base stations at that particular place – helps to increase the average revenue per user (Arpu). The Arpu of the company, which used to be Rs 90 in June, has increased to Rs 102. The industry average Arpu (for GSM) is Rs 131.

Brekke said the company's (Telenor's) investors in Norway have been made to understand that India is a new operation for the company where the competition is fierce, owing to the presence of 14-odd operators — something that's unique globally. "This is the reason why we have decided to focus on the voice segment, which constitutes over 90 per cent of the total market. We need to walk before we run by focusing on the basic, and the basic in Indian market is still the voice service," he added.

Meanwhile, Uninor has changed its strategy in India by focusing on the circle level rather than on the whole country. "We consider India as a continent and are fighting the battle at the circle level. We are already at number six in three circles – UP East, UP West and AP – and hope to be one of the top six players in most of the circles where we operate," he added.