Case 2

Telenor’s Dilemma
Group 2

Gaurav Yadav (P43015)

Priya (P43042)
Amar Bagoria (P43067)
Gorakh Borude (P43082)
Akshada Shinde (P43130)
Rahul Rupawate (P43223)
 Case Summary
● Case speaks about 2G spectrum scam where Indian Telecom Ministry was accused of
selling 2G spectrum licenses at below-market prices to a selected group of companies.
● Unitech was one of the companies that had acquired 2G spectrum license.

● Telenor- Norwegian Company enters India jointly ventures with Unitech to form Uninor.
● Out of 122 licences cancelled by the SC, 22 licenses of Uninor
● Deep dive of 79% in profits after $682 million write off from its Indian operation.
● Shaken confidence of bank and customers due to sudden indictment of government policy.
● Telenor has two major choices:
i. Exit from the Indian market
 Problem Statement
The problem faced by Telenor is Three pronged:

Should the Indian operations be continued

with some other partner?

How to make up for the losses incurred?

Should Telenor wind up its operations and

exit the Indian market?
Decision-making Parameters

Financial Feasibility Market Potential Cost benefit

Analysis

Strategic view of the Opportunity cost of letting go off the

company business opportunities in the Indian market
 PESTLE Analysis
Foremost service providers
(Television & Broadcasting to
Political uncertainty causing
household and Enterprises) with
loss of investor’s confidence
multiple acquisitions, mergers
and joint ventures.(GSM &
Political Technology CDMA)

79.12% plunge in net profit Cancellation of all 22 license

due to writing off on its Indian by supreme court due to
Operations. several violations.

Economic Legal

Social Change in sectors- m-

Health, m-Commerce, m- Government policy could
Learning - Enablers of economic hurt investor’s confidence &
growth and social modernization might deter foreign players
in India. from entering indian
Social
Environmental operations.
 Porter’s 5 Forces

Bargaining Power
of Buyers
Customer
Threat of New Intensity of
concerns over
Entrants Competitive Rivalry
Bargaining Power of ethics may lead Threat of Substitute
Regulatory High industry rivalry
policies and Suppliers to switching; Products or Services
Regulatory authorities partners may for market share;
government Reputation damage
oversight shape hold influence over reconsider due to Telenor's unique
could drive
the entry barriers licenses and spectrum reputation risks. situation due to the
customers towards
allocation. 2G Spectrum Scandal
ethical competitors.
influences
competition.
 Economic Losses made by Telenor

● 22 licenses cancelled
● Telenor purchases licenses from Swan, worth INR 6.0 billion (write-off of US$ 682
million)
● Dive of the Telenor stock at the Oslo Stock Exchange
● Loss of opportunity in the Indian market due to uncertainty
● 2012, first quarter results reported 79.12 % dive in profits (REASON - USD 682 million
write off)
What are the alternatives that Telenor has?

● End the partnership, wind up the operations and exit from the Indian market suing its
Indian counterpart
● Sustain in the Indian market with other partner using subsidiary business model and
enter into television and broadcasting industry in India
● Stay partnered with Unitech if there is a chance of license unfreezing but also
compensate for the losses from Unitech
 Evaluation of the alternatives
Continue with Unitech Exiting Indian Operations Continue with other
until License unfreezing partner

Pros: Pros: Pros:

• Stops further losses • Can expand into television &
• Indian market has huge
• Re-allocation of the broadcasting
potential
• Telenor has prior resources

experience
Cons:
Cons: Cons:
• Opportunity cost –
• Legal challenges • Will take time to breakeven
flourishing Indian market
• Entry Barriers for the investments done
• Invested resources are gone
• Competitions
Recommendations

Telenor should exit the Indian market because

● High license base prices hurt Telenor financially.
● Net profit plunged 79.12% due to write-off.
● Share price falling, loss every day.
● Difficult to compete with Airtel, Reliance, Vodafone.