|Telecom's new reality|
|Tuesday, 17 January 2012 00:00|
Uninor has valued itself at a mere Rs 600 crore
The R600-crore valuation of Uninor, a mobile phone JV between India’s real estate firm Unitech and Norway’s telecom PSU Telenor, best sums up how sobriety has returned to a sector which was once known for high valuations. This peaked in February 2007 when Hutch sold its 67% stake in the India business to Vodafone for $11 bn, but remained pretty high even in 2008 when, after it got a mobile licence with 4.4 MHz from A Raja but had little else, Uninor managed to sell a 67.25% stake to Telenor for R6,120 crore thus valuing the company at R9,000 crore. So, how is it that when Uninor has invested R15,000 crore into the business, partly financed through large dollops of debt, and has 35 million subscribers in 13 circles, it is worth just R600 crore?
That’s a question Telenor’s estranged partner is also asking, in an arbitration in Singapore as well as in a case in India’s Company Law Board. It is obviously true that, with telecom subscribers spending a lot less—average revenues per user for market-leader Bharti are down from R331 per month in September 2008 when the Unitech deal happened to R183 today—market valuations are down for everyone. Bharti’s market cap has fallen from R148,986 crore to R130,445 crore.
But valuing not just Uninor, but any of the new telcos, cannot be done on the basis of what the older ones are worth since while the latter have all broken even, the former show no such signs—Uninor’s revenues per subscriber are around half Bharti’s. Even if you assume Uninor is allowed to keep its 4.4MHz of spectrum got from Raja at bargain-basement prices, in today’s market conditions, this cannot be worth more than 3-4 times the R1,651 crore it paid in 2008. Add to this, the value of the infrastructure Uninor has built. But you then have to subtract the debt it has accumulated. Unitech may not agree with the valuations Uninor has got, but it’s clear they are nowhere near the stratospheric levels of 2008. That’s telecom’s new reality.