Telenor May Leave India as Fee Dispute Prompts Write-Off

Telenor ASA (TEL) said it may have to exit India, the world’s second-largest mobile market, after the country’s telecommunications regulator proposed an 11-fold increase to license fees.

Acceptance by the Indian government of the regulator’s plan would amount to “forcing Telenor Group to exit,” Sigve Brekke, head of Telenor’s Asian operations, said today by e-mail. Fornebu, Norway-based Telenor will write down its remaining fixed and intangible assets in India amounting to 3.9 billion kroner ($682 million) as a “precautionary measure,” the company, the Nordic region’s biggest phone operator, said in a separate statement.

At stake is Telenor’s 140 billion-rupee ($2.7 billion) investment in India, and the fate of its more than 40 million customers. Investors have called on Telenor to pull out of the country. Telenor’s licenses India were canceled in February, and the regulator later recommended re-auctioning the spectrum at higher prices.

“It is evident that India is the main reason that investors are hesitant” about investing in Telenor, Saeed Baradar, an analyst at Societe Generale in London, said in an e- mailed note to clients. “Removal of that fear will result in at least a 15 percent to 20 percent re-rating in the stock.”

Telenor rose as much as 3 percent to 103 kroner, the biggest intraday jump since Feb. 15, and was trading 2.9 percent higher at 10:06 a.m. in Oslo. The shares have gained 4.9 percent this year, valuing the company at 165.5 billion kroner.

Seeking to Stay

The proposed auction terms make it “almost impossible to participate in the auction,” Telenor said today. The company is “working actively” with Indian authorities in an effort to continue operations there.

Today’s writedown follows a 4.2 billion-krone charge Telenor said it would take on Feb. 3 stemming from a decision by India’s Supreme Court to cancel 122 mobile-phone licenses industrywide, including 22 held by Telenor’s Uninor venture. The Indian assets no longer have accounting value after today’s charge, Telenor said.

The writedown on the permits and goodwill, which amounts to 2.6 billion kroner after non-controlling interests, will be booked in the first quarter of this year, Telenor said.

To contact the reporters on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net; Alastair Reed in Johannesburg at areed12@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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