Telenor’s Dilemma:The 2G Spectrum

Scam in India

Case SummaryThe case is about a telecommunication company named Telenor based in Fornebu, Norway. Telecom is one of the most swiftly growing sectors in India. And when Telenor entered India as a joint venture with Unitech in 2008, its operations were the most affected when Supreme Court cancelled licenses on the grounds that the allocations were made in an unconstitutional manner. Uninor lost all the 22 licenses that were granted and its operations were discontinued.

About Telenor in IndiaEntered India in 2008 as a joint

venture with Unitech Wireless to form “Uninor”

One of the foremost service providers among other players with foreign investment like MTS India, Etisalat-DB, IDEA Cellular, S Tel

Received 22 licenses for 21 regions all across India

Major ViolationsEntry fee for license issued in 2008

pegged at 2001 price wherein the number of mobile users went upto 350 million from 4 million in 2001

Inexperienced players in telecom industry allowed in bidding process

Cut off date advanced by a week without prior notice

Recommendations of Finance Ministry, Law Ministry and TRAI ignored by A.Raja (telecom minister)

Licenses issued to only 9 companies when there was no restriction on the number

Unitech and Swan Telecom sold their stakes at much higher valuation without even having a single subscriber

The DilemmaWhether Telenor should contest the

judgement to win back the licenses or entirely exit Indian operations?

Offload the liability onto Unitech Wireless, as Telenor had already overpaid for the licenses

Exit the business, putting responsibility on Unitech to bear the exit charges of the business

In my opinion, Telenor should exit its operations in India. With already established telecom operators like Airtel, Vodafone, Reliance, Idea, Telenor is most likely to struggle for its market footing in India where acquiring market share is no cake walk. Also, with TRAI recommending tenfold rise in base price for the license, and Telenor reporting losses with a 79.12% plunge in its net profit in 2012, leaving the operations in India is a viable choice. If it tries to win back the license it will be the biggest gamble which might result in big failure for Telenor.