Telenor has warned India that its unpredictable regulatory environment risks deterring foreign investment after the Norwegian mobile operator was drawn into a scandal over telecoms licences that has rocked the Indian government.
Jon Fredrik Baksaas, chief executive, urged India to “clean up the mess” surrounding telecoms regulation and said operators would not make big decisions over further investment without greater clarity.
“This is very negative for the industry, it is negative for foreign direct investment and it is negative for customers because to expand mobile coverage will take longer with this kind of uncertainty,” he told the Financial Times.
Telenor is one of several operators facing possible licence cancellations in India as part of an investigation into suspected irregularities during the allocation of second-generation spectrum two years ago.
The scandal caused the resignation of Andimuthu Raja as telecoms minister amid claims the government lost $39bn by handing out licences too cheaply.
Mr Baksaas insisted Telenor had done nothing wrong. “We have fulfilled our side of the deal in terms of deploying resources. We expect the government to honour their commitments.”
He said the dispute fitted a broader pattern of regulatory uncertainty in India. “The weakness that we’ve seen recently in many sectors – not just telecoms – is something India needs to sort out because it hurts India’s reputation internationally.”
Telenor is one of several foreign operators active in India’s fiercely competitive mobile industry, alongside Vodafone of the UK, DoCoMo of Japan and Singapore Telecommunications among others.
India is the world’s second-largest mobile industry by subscribers after China, with more than 600m users and it is forecast to almost double in size by 2015, according to official estimates.
Telenor secured its Indian licences as part of the acquisition of Unitech, a local telecoms company, in 2008. It had 13.5m Indian subscribers at the end of October.
The Oslo-based group is one of the world’s biggest emerging market mobile operators with a presence in 11 markets from Hungary to Malaysia.
Investors have shown little enthusiasm for Telenor’s Indian business amid concern over the heavy capital expenditure and low margins associated with the market.
“We went into India at the same time as the financial crisis in the autumn of 2008, which was a period when investors were shying away from emerging market risk,” recalls Mr Baksaas.
He added: “We are not very proud of the effect that had on the stock price.”
He insisted that Telenor remained committed to its Indian strategy but said decisions over further investment – such as whether to take part in predicted industry consolidation – would depend on the regulatory environment.
Shares in Telenor are up 15 per cent so far this year and Mr Baksaas said it had started to “win back investors’ trust”.
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