The south Asian sub-continent is proving an interesting investment location for high-tech companies. In 2009, when many firms were feeling the effects of the global economic downturn, Norwegian mobile telecoms provider Telenor not only managed to grow its Bangladesh and Pakistan operations, but also took its first steps into the Indian market.

the group entered the Asian market in 1996 through its investment in Grameenphone, a joint venture with Grameen Telecom in Bangladesh. “Grameenphone is now the market leader [in Bangladesh] and enjoys a very strong position,” says Jon Fredrik Baksaas, president and CEO of Telenor Group.

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 In 2005, Telenor made the largest direct European investment in Pakistan with its launch of Telenor Pakistan, now the fastest-growing mobile phone network in the country. According to Mr Baksaas, its Pakistan operations are going well, almost breaking even on cash flow last year. Following this success, in 2009 Telenor entered the massive Indian market after joining with the country’s second largest real estate company, Unitech, to create the Uninor mobile telecoms brand.

Going public

Grameenphone has been such a success that Telenor took it public on the Dhaka Stock Exchange in 2009. “There was a 10% dilution to the existing shareholders. Half of it was sold to institutional investors with a one-year lock-up mechanism and the other half was sold to the retail market in Bangladesh,” says Mr Baksaas. “We got close to a million retail share subscribers and they all fully backed their subscription with a cash instalment.”

The flotation was so popular that the company had to select about one-third of the initial subscribers via a lottery held at a one-day event at a cricket stadium in Dhaka. Mr Baksaas says: “When the day was over, 317,000 private individuals found their name written on a list that was more than 200 metres long.

“When the listing started, the stock price quadrupled locally, so the demand for a blue-chip firm in the equity market has proved to be very strong. Grameenphone has now become the biggest company on the stock exchange. It is the biggest taxpayer in the economy and it’s a significant direct and indirect employer.”

So what makes Telenor want to do business in the sub-continent? “The best incentives that any government can offer are a level playing field, reasonably predictable investment conditions and a sense that it knows what it wants to achieve by attracting significant investment,” says Mr Baksaas.

“And [in the Asian sub-continent], both the licensing framework and the tax regime play a vitally important role in judging whether the investment platform is a good or a weak one. For example, in 2004 when the Pakistani government decided to introduce two new licences into the market, what it got in return for offering us a transparent investment base was an industry group with long-term ambitions to build a sustainable business model. Consequently, Telenor today ranks number two in the Pakistani market with a 60% to 65% penetration of the population.”

According to Mr Baksaas, the Pakistani government’s incentives mean that Telenor has been willing to invest in the country. He says: “We’ve introduced a leading network that today serves more than 20 million customers. The way in which the telecoms infrastructure has been implemented in Pakistan – and in Bangladesh as well – has boosted the economy and made an immensely valuable contribution to the growth of GDP in other sectors. For example, it’s generally recognised that a 10% growth in mobile penetration translates into a 1% to 1.2% growth in GDP. It’s also generally recognised that a 10% growth in internet penetration has an even stronger effect on GDP. So we are investing in building infrastructure. And if we can do that in an environment that also understands the need for financial incentives, to help operations become profitable in the longer term, that’s an important part of the equation.”

Added value

Of course, mobile networks are about a lot more than simple voice calls. In the emerging markets, where many people are excluded from the banking system, mobile phone operators are rolling out a host of value-added propositions.

“In Bangladesh, our mobile financial service offers bill payment and local transfer services,” explains Mr Baksaas. “We’ve already started a transfer service called ‘easypaisa’ in Pakistan because we have a stake in a small bank in the country. We have now expanded it so internal transfers can be made, meaning people in rural areas can receive money from people working in towns and cities. It’s a much more efficient way of transferring funds to the family members that need them.”

Telenor is opening these emerging markets up to innovation as well as enabling sustainable connectivity. “For the first time, many of these countries and their geographies can be served by a modern communication platform – that’s an innovation in itself,” says Mr Baksaas. “We’re also aiming to bring forward mobile broadband. We’ve expanded our mobile operations to offer financial services in these countries, which have a large unbanked population. There are inefficient payment systems between utility providers and their customers. So the most popular service in Bangladesh and Pakistan over the past couple of years has been bill payment.”

The firm’s environmental concerns, particularly its efforts to reduce energy consumption, go hand in hand with its efforts to innovate and promote social inclusion. “Both Telenor and the industry in general are deploying new network equipment which has much better energy consumption,” says Mr Baksaas.

“Equipment deployed today consumes 30% to 40% less energy in absolute terms than three years ago. The industry is concentrating on finding an efficient way of establishing renewable and distributed energy sources on our base stations, such as wind or solar power.”

Another hot topic in India and other Asian markets is the bidding plan for third-generation (3G) auctions. Mr Baksaas says: “Some markets are mature enough, have had 2G long enough and have the penetration rates that prove the market is ready to go 3G. Uninor will not participate in India’s nationwide 3G auction. We have just started with our 2G roll-out, so penetration is still low and the double SIM card concept needs many more years of work before it is ready for 3G.”

COMPANY PROFILE

Telenor

South Asia operations

Bangladesh: Grameenphone.

Pakistan: Telenor Pakistan.

India: Uninor.

President and CEO

Jon Fredrik Baksaas

Headquarters

Oslo

Founded

1855