Telenor, the Nordic telecom major is all set to launch its services in India and is having full knowledge about the facts that how much cash flow loss could be suffered by the company.
According to a spokesperson from the company, the company would suffer the cash flow loss of $3.2 billion or Rs.155 billion in the initial phase of its India launch. The company is expected to face this loss before it reaches the breakeven.
He also said that the company would be reaching its EBIDTA breakeven point in the term of 3 years after its launch in the country. While it will take the term of 5 years for reaching operational cash flow breakeven.
Before it starts the operations in India, Telenor is facing some legal trouble. Recently, the company has faced a CBI probe on the matter of license which were issued to its Indian partner Unitech in the month of January 2008.
Telenor came in the legal web when CBI started raiding several license holding companies last week.
The license for pan-India operations was availed by Unitech for the total cost of Rs.1.651 crore. However, later on, it sold the license to Telenor at a higher price which made Unitech earn multiple income from that.
The company said in a statement that it is totally aware about the CBI investigations which are related to the 2G spectrum to various telecom companies. It said that Telenor Group is ready to cooperate with the investigating bodies. One cannot predict that what will be the result of CBI investigation.
Besides CBI investigation, Telenor is also going to face some tough competition on the entry pricing. According to the ongoing trends, any telecom company comes up with attractive tariffs on the initial basis. However, the leading companies like Tatas have already created tough competition with their pay-per second plans.
The telecom operators in India, mostly earn their revenues through the voice traffic, the new players in the sector would face the problem of improving this category.
The tough competition would be there for Telenor from the side of its rivals also which are expected to add about 60-120 million subscribers by the time latter makes its strong image in the country.
According to the analysts of telecom sector, Telenor is going to face tough competition with seven leading players already capturing the market and this would also affect the breakeven term.
Currently, Telenor stands as the sixth largest telecom player of the world, however, this image is not expected to help the company in India as the brand is unknown here.
Further, Unitech which is its Indian partner is having real estate as its core business and is not involved in so much of branding for its products and services which is necessary for grabbing more subscribers in telecom sector.
