Uninor Unveils – Latest operator to roll out services
Leading Norwegian telecom firm Telenor is the latest operator to enter the fastest growing wireless market in the world, in joint venture with Indian realty major Unitech. The twelfth operator in India, Unitech Wireless is rolling out GSM-based services in seven of the 22 mobile circles in the country under the brand name Uninor. The circles are Tamil Nadu, Kerala, Karnataka, Andhra Pradesh, Uttar Pradesh (East), Uttar Pradesh (West) and Bihar.
“This is indeed a milestone in the long journey to become a significant operator in India,” says Stein-Erik Vellan, managing director of Unitech Wireless in India.
Telenor, which has 67.25 per cent stake in Unitech Wireless, had been gearing up for a year-end launch. It put its rollout objectives on a fast track. For instance, the company decided to lease and rent towers instead of building them so as to cut capital costs significantly. Also, in order to reduce time-to-market, the company outsourced its entire back-end service needs to Wipro and Telcordia.
As a new operator in a highly competitive market, it was expected that the company would play the aggressive tariff card. However, the services, though competitive, have been pegged at Re 0.29 per minute for local calls and at Re 0.49 for national long distance (NLD) calls. Evidently, the company has steered clear of the tariff war and the one-second billing plans currently being offered by other service providers. According to Telenor’s CEO Jon Fredrik Baksaas, the idea was to price calls in India competitively but not too aggressively.
Telenor’s India strategy is clear. It is looking at a long-term engagement in the country. In fact, the government recently approved Telenor’s proposal to raise its stake in Unitech Wireless to 74 per cent, the maximum permitted in the sector.
Over the next five years, the company intends to corner at least 8 per cent market share. “The market is surely big enough to accommodate all the new players coming in. We are confident of garnering a substantial part of this busy space,” claims Vellan. The company is also aiming for an earnings before interest, taxes, depreciation and amortisation (EBITDA) break even in three years and an operating cash flow break even in five years.
However, given the prevailing cutthroat competition in the industry and Unitech Wireless’s pricing strategy, its average revenue per user (ARPU) is bound to be low. Company officials claim to have factored that in. “Our ARPU will be lower than the industry level initially, but it will rise to the sector’s levels by the next yearend. We are testing a model that we have not used before in any country. To address the low ARPU situation, we have kept the base cost low too,” observes Vellan.
As a new entrant, the company is in a position to enjoy some advantages. Equipment suppliers, for instance, have given discounted rates for equipment as the production of 2G lines has now depreciated to a large extent. This has, in fact, allowed Telenor to actually slash its earmarked capital expenditure by Rs 35 billion from the
