Welcome to Telenor's update on India, whether you're present here at Fornebu, listening on the phone, or watching this by webcast or via mobile phone. My name is Meera Bhatia, and I have the pleasure of guiding you through the presentation this morning. I hope the short video has set the mood for this occasion, and you're all full of energy and inspiration. Before we start, I hope everyone has a copy of the material we have made available. That is our press release and the PowerPoint presentation to be used here any minute. The material can also be found on our website at Telenor.com. There, you will also find instructions on the different alternatives to watch this presentation. As usual, there will be a Q&A session directly after the presentations, first here from the audience present, then from the ones participating on the phone.
We will try to end the entire session at about 10:30 today. In order to allow for questions from many of you, we ask you to kindly limit yourself to one question with one follow-up question if clarifications are needed. After the Q&A session, there will also be an opportunity to have individual interviews for those of you present here at Fornebu. To present the update today, we have our CEO, Jon Fredrik Baksaas, and our India Managing Director, Sigve Brekke. First, I leave the floor to Mr. Baksaas.
Yeah, thank you, Meera, and good morning to all of you. December, cold temperature outside, India, warm temperature, both physically and in the marketplace, as we could see from the entry movie here. Thank you for joining in on our presentation. After we, for the Indian project, after we carried through the auction process just some weeks ago. It's been quite an eventful year, and today we want to give you the platform and to present our ambitions in the Indian market going forward from here. So we will start with a business update. We will take a look at the Indian wireless market in general, our ambition and our strategy. We will be looking at business plan and targets, and hopefully, also a summary at the end.
So let me start in the first end, on the business update. Telenor is a company that, over the years, have been targeted growth markets, and the Asian markets have been very much in our focus in that sense. One could say, though, that when we started in Bangladesh in 1996, that was a very early project at that point in time. At that point in time, we didn't necessarily knew that we were coming to reach both the size and the presence that we now have in Asia.
We are now in five markets, all growth markets for Telenor over the last years, and with the global economy having its prime driver, so to speak, in this area, we are positioned also in that part of the world, which is driving global economic growth in itself. Also, by the fact that domestic consumption is growing in all these countries. We have also reached a size, and we believe we have a governance model in Telenor that can handle these markets.
These markets are very competitive, and we need to be the smartest guys, the smartest guys in the streets every day, so to speak, in order to get the attention of our customers and to reach loyalty, a loyalty level in our customer base, which is sustainable over time. We also believe that we, from an operational aspect, are able to establish operations which are both efficient and excellence in its setup. And I think we have showed both through our operating results in other markets and India throughout 2012, which has been a very difficult year to keep the momentum up, that we are capable of delivering operating progress as we move along.
We also carry with us a lot of learnings from India in particular in this case, because the Indian market is, Sigve will show to you a little bit later, a bit more differently put together. Where the partnership model, where you source long term with partners and also share risk with partners, is much more developed than what is the case in in other and more traditional markets. And these learnings, they give us new energy in other markets and also fuel us with new concepts that can benefit other Telenor operating entities in in the group. When we have moved into India, w e didn't expected the events that came forward after the Supreme Court ruling came forward in February this year.
This was quite a surprise to us and to the market in general, and it also put a pretty high level of uncertainty into the Indian market in general, in such a way that investments in the market and in networks in this period probably fell significantly compared to the year before. And this uncertainty and the timeline in question here became, of course, the biggest problem for us, not knowing what kind of continuation that there might be towards the auction that eventually came. And in this period, I think it was done a phenomenal piece of work with our colleagues, from our colleagues' point of view, in Uninor, keeping the momentum up and delivering progress underway under these kind of circumstances.
It was this progress that basically also made Telenor able to participate in the auction on the terms that finally came through after a lengthy process as we saw them just over some months ago. When the auction eventually happened, we were ready to move within the frameworks that we had set for ourselves on the project from earlier days. In parallel with this, we also had legal dispute with our partners. We settled that before we entered into the auction process.
We have taken also a rational approach to be realistic enough to know that not necessarily all our circles would potentially go through into a sustainable position, and we reduced the number of circles down to nine, as you know, and we have now Spectrum in six circles addressing roughly half of India's population. This has established a new platform for continued operations, the way we see it in Telenor. The Spectrum that we have acquired is for 600 million people, in rough terms. It addresses the circles that you can see on the slide here. In this area, we consider that the real penetration among users is roughly 40%. Penetration stands below average in these circles. Reason being, the city circles are not included in this geography.
We have a circle-by-circle approach in this auction. So when we participated, we had the INR 155 billion in mind, and we had the license fee in mind, the way it turned out. It was necessary for us to see the staggered payment of license fee in such a way that only 1/3 should be paid up front, and the 2/3 should be paid over 10 years, beginning the third year of the operation. This is a 5 MHz Spectrum. It lasts for 20 years, and it's technology neutral. The overall price tag for this geography is around INR 40 billion, or roughly NOK 4.2 billion, out of which 1/3 was to be paid up front.
During the operation, we have demonstrated progress under these circumstances. Here we show you the revenue development in the six circles in which we are operating, plus the gray area demonstrating the other circles of which some of them are already scaled down. Throughout this period, we have demonstrated that we have built a better position consistently quarter by quarter, though still seeing negative figures, which is only natural since we are only still within the three-year period since launch. We had a EBITDA breakeven measure after three years. We have improved that to say that we will be cash flow breakeven towards the end of 2013.
It is this kind of progress that basically have given us the ability to strengthen the business case, but also narrowing the business case to a more focused geographical area. Namely, those circles that we have had and received good traction, and have been able to build market share, and where we see that it will be possible to take a sustainable long-term position. The first circle that we anticipated would breakeven was UP East, and the targets of reaching that within the end of 2012 was a pretty hairy target when it was first spelled out. But we have to give recognition to the management in UP East. They really managed to move forward the way they targeted for themselves.
With 7.3 million subscribers, the number five position in the marketplace, and a very low cost structure per minute, they have been able to turn breakeven in late October. So we say that November will be the first month, which is breakeven for UP East. And there will be other circles that come close to this, probably early 2013, we are targeting to see both Maharashtra and Gujarat doing the same. And of course, when you reach breakeven, you also get the opportunity to move with more confidence in that geography, developing the clusters further. Because this is a cluster strategy.
We do focus strongly where we believe there is true customer base and market base for our network, and in those clusters, we go very head on with deep distribution, as Sigve will show you later on. We have been able to keep the wheels running, as I said. What will happen now is that we will use the new company, Telewings, that won the licenses through the auction, as the new vehicle in India. There will be a business transfer, which is now ongoing, to transfer all liabilities and commitments from Uninor to Telewings. There will be approvals underway, and we will have renegotiated contracts with vendors as the base for this new operating company.
This new operating company has also a new partner, and our targeted ownership structure in that partnership is Telenor 74%, and Lakshdeep Investments 26%, respectively. We are now at 49%, 51%, waiting for the FIPB approval to raise our stake from 49% to 74%. This is the same kind of approval that we have had for Uninor, and we consider that that kind of approval will be a formality to reach out. I think I'll leave it there, and want to invite Sigve Brekke, MD, in Uninor for the time being. He's been deeply engaged in the progress that we have demonstrated in this period. And Sigve, please tell us how you want to move this forward together with your team. Thank you.
Well, good morning [audio distortion]. Yeah. Okay, let me try. Good morning to all of you. I will try to go through some slides showing where we are today, and more importantly, showing where we are heading. Let me start with a slide on the market. I think the last two years have been a really troublesome period for the Indian telecom. Often you hear that there has been no growth, actually have been negative growth in the market over the two last years. That's not entirely true if you look at the statistics. Start with the subscriber numbers. This is SIM numbers, not subscriber numbers.
We estimate that the real penetration in India, Pan-India, is probably just a little bit more than 50%, which mean that you should shave off at least 200 million customers from the 900 million SIM number you see here. The last few months, this has been negative in the market, and the reason for that is there is significant cleanup of customers which are not active anymore. Two weeks ago, the regulator also imposed a new activation process, which means that it's now much more difficult to activate new customers. The entire growth in the industry had, because of that, come down 50%-70%. You will see in the month to come, significant negative development of net adds in the market.
However, you will also see that this is not going to impact the revenues in a large way, because you are basically taking away a lot of the customers or a lot of the SIMs, which never really ended up in a customer's hand, or you are taking also away some of the rotational churn. So I expect that the moving forward, you will see some positive effects on the on the EBITDA level, because there are less money now being put into sales and acquisition costs. On the revenues, you see that the market has been growing despite all the problems that has been the last two years. In our six circles, there is a revenue growth of 10%, and in the Pan-India, it's 8%. This is coming from some rationalizations in the market already.
Some of the operators have scaled back their operations, and I'm coming back to that. We also see that incumbents are starting to move up the prices. They took it up almost 20% a year ago, and if you should believe what you read in the press, there is another price move coming now from the incumbents' side. However, there is still significant amount of free minutes being given out in the SIM cards, which also is then hampering the growth.
So what I hope now, with the new, more transparent activation process, with less commissions actually being thrown out to the retailers, I also hope that some of the free minutes are taken out from the SIM cards, which will actually help these figures to grow. The way we look at this is that there is a large untapped potential for voice. That's why we have focused on the six biggest circles in the auction. And as Mr. Baksaas said, the six regions where we are present now is actually covering more than 600 million people. The real penetration in these circles, it's in our calculation, around 40%, and the growth is coming from data. It's coming from voice, it's not coming from data.
I think we all know that the data growth has been a disappointment in the Indian market. My view on that is that that's going to continue to be a disappointment for some years to come, for two, three reasons: One, I think that it's still a little bit too early to have a real customer demand for data. Most of the people are still focused on the voice part of the market, and also on the quality of voice. Secondly, the 3G auction or the 3G license that the big operators have is only with 5 MHz, and it doesn't really work. The 2.1 MHz 3G is a challenge out in the rural area where you have coverage problems. And in the cities, 5 MHz is really not enough to offer quality service on 3G.
And that's why I think that there will be still some time before you see 3G taking off. That's why we have chosen to be extremely focused on the voice potential and the voice growth. And that's also why we have chosen to be very focused on that. So there is no postpaid in the Uninor product portfolio. There is no 3G. Yes, we have data. Actually, our data as a percentage of the revenues is around 10%, similar to what it is with the incumbents that even have 3G. So we are continuing then to take that as a focus until we see that the market demand is changing. This is an interesting slide. The conventional wisdom in telecom is that you need to be among the three biggest in the market to make a difference.
You have to be up among the three if you want to earn money. And yes, that's actually correct, if you look at some of the other markets we have in Asia. The three big guys in Thailand is having 99% of the market, same in Malaysia. Bangladesh, also, the three big guys are really, really, controlling the market. That's different in India. The three big guys, which also happen to be different from circle to circle, are only having 70%. So it's a 30% market share left for the ones that are not up among the three.
Of course, you cannot be number 10 over time, but my, my view on this is that if you manage to build an operation where you have a scale as being number four, five, or six, there is money to be made, not only customers, but also margins to be made out of that market. Another thing which is a little bit special in India, in my view, compared with some of this market, is the lack of loyalty in the market. The churn in the Indian market is much, much higher than in any of our Asian markets, and the reason for this is the extreme price sensitivity among the customers. That's why you see that even the incumbents are having a monthly churn of 8%-9%.
So if you take the 900 million subscriber number or the number of SIM I showed you on the first slide, it actually means that 80 million SIMs are changing operator every month. And that's a great opportunity for a newcomer, because you can basically be there and pick all the, those unsatisfied customers. We have talked a lot about clusters, and I'm going to, to talk more about what we really mean by that later in the presentation. My experience from India is that you don't have to be pan-India to make success. India, in telecom, is more a continent than it is a country, and nobody actually are successful pan-India. Even the two, three big guys, you will see that they take their most of their money from six, seven circles. That's where the profit is.
And if you look at some of the big guys that have been around for the last 15 years, they will be negative on EBITDA in several of the smaller circles where they are not so successful. So you don't have to be pan-India to build a business. And I will even take it one step further, you don't even have to be pan-circle to make business. And as Fredrik showed on one of the previous slides, our circles have roughly around 100 million population in one circle or in one state, and you don't have to be present even in 100% of that geography. What is important is that you are present and that you make a difference in the cluster where you operate.
So if you look at this slide, we probably cover around 40%-45% of the population in the states or in the circles that we are currently present. If you take UP East as one example, the one in the upper left here, we have a subscriber market share of 10% in UP East. If you then see that, say, that we cover around 50%, means that in our covered area, our real market share is around 20%, and that's what we are targeting. We need to have a 20% market share in the clusters where we operate. Our experience is that when you move up to those 20%, that's when you start realizing some pull effects. That's when customers start to know you, customers start coming and ask for you.
You have the brand necessary, and you start also realizing some scale effects. So what we are trying to do is then, cluster by cluster, get up to a 20% market share, and then move into new geography. So the 40%-45% population coverage, gradually, we are going to increase up to, to the same level as, as the incumbents, but we are doing it step by step. The path to consolidation has already happened. If you compare now with tow, three years back, you will see that four of the smaller players have already packed up. You will also see that out of them, the kind of, mid-size players, there are three of them which are struggling. I don't wanna name them on air, but three of them are struggling.
According to statements they have made, all three of them are now scaling back their presence in the loss-making circles. All of them are scaling back in six or seven circles. So on a circle basis, consolidation is actually already happening, and we see now in several circles that the number of real operators are coming down to five, six players. We think more consolidation is going to happen, but that consolidation doesn't necessarily have to be on the Pan-India basis, it can be more a circle-by-circle basis. What we are waiting for now is the M&A policies getting into regulations. The policy is clear, but the regulations are still lacking, and we think that in the coming four, five months, those regulations should also be there.
They also need to make clear how they are going to deal with the Spectrum, meaning if you consolidate two companies which both have Spectrum, is there an additional fee that's going to be paid, and how are they going to deal with that? Long term, in my view, there will be four to five operators in each and one circles. There may be more registered operators on a Pan-India basis, but on a circle basis, four to five. And if you are among those four to five, you will be making money. That's my claim. Our business model is based on organic growth. That's where we are going to get the return that I'm going to talk about a little bit later. However, we will also be open for potential consolidation alternatives.
We don't need to do that, but we will, we will of course, observe what's going to be on the plate. If at all we are going to consider that, we are going to have a very pragmatic and a very value-driven approach, and we are going to keep within our financial parameters. The regulatory framework has been in a really, what do I call it? difficult stage the last two years. However, I must give a little bit credit to the Indian government, that when they finally got their act together, things are moving. And if you look at it now, now we have established a market price-based pricing for Spectrum. That was the auction we just went through.
We have also now established a principle that every thing in the future which has to do with Spectrum, will also be based on auctions. We have also established a principle that in these auctions, you are actually buying technology neutral Spectrum, which you can use to whatever you want. It's interesting to see that one of the smaller players that won five circles in this auction, Videocon, are saying that they are not going to use their 1800 Spectrum for voice. They are going to use it for 4G. I wish them good luck with that, but that, that's interesting to see how that technology neutrality is actually now enabling you to do more than just traditional voice. It's also interesting to see that the government is trying to level the playing field.
They have made it clear that a 900 refarming auction is now coming up. That's going to happen in the beginning of next year, and even that, they are charging incumbents for existing Spectrum they're having above 4.4. So in a way, they have taken the opportunity with the situation that the Supreme Court ruling gave to try to clean up all the regulatory issues that have been floating around for some while. There are a couple of things which are important for us in the future. The first one is that there is most likely a new auction coming in the first quarter of next year. We will, of course, be looking at that at least for one of our circles, Mumbai, where we currently have an operation.
But again, we will be doing a very pragmatic, value-driven approach when we are considering that, and everything we do will be within the financial parameters or the financial targets that we have communicated before. The second thing, I think, which is even more interesting for us, is to see when are they going to reduce the interconnection rates? Currently, the termination rates are INR 0.20 , which is very high for us when we are terminating our calls in the competitor's network. The regulator have, had proposed to take that down to INR 0.10 , and then down to 0. If that happen, it's a huge advantage for us as a newcomer, because then we can start offering much more aggressive, tariffs also for calls that goes across the, the networks.
Another important milestone for us is when they are going to implement one nation, one rate, such that you cannot have different prices between the different circles in India. The last part I want to talk about on the regulatory side, it's the Spectrum policy. In the policy, they say that they will allow Spectrum trading, they will allow Spectrum sharing, and both these two things are very important for us. If they allow Spectrum sharing, that means that our 5 MHz that we got through the auction can have much larger value if you, if you combine this with another operator.
Even if you don't go all the way to combine the Spectrum, you can start having active and infrastructure sharing, where you are sharing not only the passive part, as we do today, or the radio play, or the transmission part, but you are sharing all the antennas, all the electronic equipments, everything but the TRXs. You still have control of your radio network. If you do that, there's a significant OpEx saving and also CapEx saving coming out from that. So I hope that those principles that they have laid down in the policy framework is now coming into regulations. Now I want to talk about our ambitions and our strategy.
Our ambition is to create value by taking a credible mass market position. My view is that the mass market in India is big enough to only focus on the mass market. You don't need to be a full-fledged telecom operator to have an offer for all the different segments in the market. And the real growth is in the mass market. That's why we are saying that our entry strategy is to build up a scale in the mass market, build up a brand, build up an organization, build up a distribution network, and also build up an operational scale, and then we will grow with the mass market. Of course, further down the road, we also need to offer postpaid services. We also need to go more into data services and so on and so forth.
But right now, our focus is to take a position on this market, and that's why we have an extremely simple strategy. This is a strategy the entire organization in Uninor know about. It's about being best in servicing the basic, and that's basically the basic demand from the mass market, which is local voice. Also having processes which makes it easy to sign up as a customer, having processes which makes the customer service as good as possible on basic, and so on. The second one is to be best in mass market distribution, and I'm coming back to that. The third one, of course, if you take that low cost - now, if you take that affordable pricing position in the mass market, you also need to be lowest on cost.
I'm going to go back to how we do these three strategic points. Starting with the price point. Our brand position, it's Sabse Sasta. And if anyone from India here, or if there are anyone on the call from India, you know that this means in Hindi, simply the cheapest. That's the meaning, and that's the position we're trying to establish. The reason for that, it's what you see the pictures here. It's extremely difficult for a customer to understand the price plans being offered from the different competitors in the market. There are a lot of what I call it? Small letters, a lot of conditions, a lot of numbers. It's almost impossible. In that jungle of offerings, we basically go out there, and we say, "We are the cheapest." That's it.
There is almost a price guarantee that we want to be the cheapest. We want to own that position. And that's why most of our marketing, it's on the ground, it's below the line, it's on the customer front, it's not on TV. Our brand surveys now shows us that we actually have captured that position, being seen as the cheapest. The way we do that in practice is that we have very attractive online offers. We also use dynamic pricing to adjust just our price, our tariffs in accordance with the utilization of the network. So when we see we have empty space in the network, we reduce the prices and boost the traffic. And we also focus on recharge. You will see that our recharge offers are better than the competitors.
Of course, that is to make sure that our customers are staying on, and that it's attractive for them, not only to buy our service, but also to top up their SIM cards. There is an advantage of the multiple SIM environment we see in India. We estimate that in the market now, it's more than 50% of the handsets are dual SIM handsets. The advantage of that is that if you want to try out another operator, you don't need to change neither handset nor really change your operator relationship. You just put in another SIM. So what we see is that a lot of our customers comes in on the lower ARPU band. They come in and put us into that dual SIM handset to try us out.
They are not giving up their primary SIM, which they have used for a long time, but they are trying us out. So it's an entry level. Then we see that our attractive price offers make them using us more and more for all outgoing calls. They still keep an incumbent SIM for incoming calls, but for outgoing calls, they are using our SIM. So you see them moving up. And then up to the top level is when a customer see that I live in an area where Uninor has a perfect coverage, I can use them as a first SIM. I don't even need a second SIM anymore, or that they live outside an area where we do not have coverage, but they work in an area where we have coverage, so they play around with two SIMs.
The way we measure this is we look at how many days a month is our customer using us. We have moved up that number from 18 to 22. So today, on average, our customers are using us 22 days a month. And we are really, really happy with that. If we can move that up a couple more days, we will really be up to the top of this pyramid. To try to reduce the churn, we have tried to take out some industrial effects of what we have learned from the other Asian market. What this is, is a sophisticated IT tool, where you basically you take the statistics you have from your network. In your network, of course, you know the traffic pattern during the day.
You know when you have an empty network, you know when you have peak hours, and it's hitting the congestion. So you have that information. The other information you have, it's the sales in your distribution. So you see how many SIM cards are being activated at any time. And the third part, it's the customer behavior. And then you put all these three information parameters into one tool, monitoring tool. And then we see, for example, that in this area, we have an empty network, or not an empty, but an underutilized network. Okay, let's then send direct offers to the customers, below the line offer to the customers to boost their usage, and let's expand the distribution. And we do that area for area.
That tool is something we have developed from the other Asian markets, and enable us to run really, really micro campaigns, and to utilize both the distribution and the network to it, to its fullest. Knowing that this is an analyst and investor conference, I need to talk a little bit about ARPU. What you see here is that we basically had a flat ARPU development, the last two years, and I'm quite, actually quite happy with that. When we are presenting the Q4 this year, you will see that ARPU is going up. I don't want to tell you how much, but it's going up. The pricing strategy we are having is that our OpEx model is that we pay for the same, if the network is empty, if it's half, full, or if it's completely full.
So it means that filling up the network with traffic is without any additional cost. So what we do is that we go into the market with very cheap offers. First, on-net, as I said, and then later on off-net, and then we fill up the network. And when the network has started to fill up, then we try to extract some of this back. So we start introducing peak hour pricing, and we start also introducing off-net pricing, and we also take up the on-net. So with that, we are trying to move up the customer usage. Today, the minute per user in Uninor is much higher than the industry. On a monthly basis, each customer in Uninor, on average, is using us for 520 minutes, whereby the industry level is around 380 minutes.
So of course, we are pumping more traffic in our network than our competitors are. But we can do that because we have that capacity, and this is how we, over time, are going to grow the ARPU. Today, our ARPU, compared with the industry prepaid ARPU, we had to, to take out the postpaid ARPU, is probably around 30%-40% lower. So we are significantly lower than the industry. Over time, of course, that gap need to be, be narrowed. If we are extreme good on cost, we don't have to, to exactly match the industry ARPU. But of course, we cannot over time, have this big difference. The same we do on churn, and you see that some of the tools that I explained on the previous slide are starting to pay off.
Our churn is now down to 11%, whereby the industry churn is 9%. In our best performing circle, we are down to 8%. That's UP East, which is performing the best. So we are now starting to get effect of the churn mechanism that we also are doing. India is a pull market. It's so confusing out there, that when a customer go to a shop, he basically have no idea what to buy. Our estimate is that 60, at least 60, or 60%-70% of the customers are going to a shop and ask for an advice. So then it's up to the shopkeeper to find out which SIM card am I pushing, and I have nine or 10 SIM card in my shop.
The only way you can deal with that as a newcomer is if you have a good grip of your distribution. In our distribution machine, in the six circles, we have 350 outlets. None of them we are controlling. All of them are selling all the different SIM cards. We have some few branded shops or some few franchises, but the big, big volume is up there. We have 8 million customer interactions every day. 8 million of our customers are going to one of these shops every day, either to buy a SIM or to recharge. These are not people that are recharging INR 300 in one go and use it for two month. They're recharging INR 10 and use it for two days, and then coming back two days later.
So our model then, and I've done that in the circle, we have developed a distribution management system. Again, this is an industrial initiative we have done across Asia. This is an IT system, which also have processes similar between all the Asian markets. So what we are doing is that we as a company are communicating directly with these 350 outlets on a daily basis. We pay commission directly from the company, not via distributors. We are physically distributing the goods to the outlets, through our people, every day. On top of that, we also know exactly what the stock in each and one of these 350 outlet is on a daily basis. Not only SIM stock, but also recharge stock.
And this is what we are using then to drive the push in that retail, and using to monitor and to create relationships. I've talked a couple of times on clusters. A cluster for us is a community of interest. 80% of all the calls a customer make in the industry is made within a cluster or within a community of interest. Only 20% is out by that. So what we are trying to do is then to look at how can we have a comparable network in a cluster, and then have a price offer which is better? So what we do is then building this up from the ground. The lowest manager in Uninor is a guy that manages 15 base stations. He's responsible for 15 base stations.
Each and one base station for him, it's a business. He will know, and he will have a target on when is this base stations going to be profitable. And each of these 15 base stations, he has a profitability target on, and then he is reporting up to another manager, which is responsible for that cluster, and so on and so forth. So what we are doing is that on a daily basis, are measuring EBITDA, actually, not only revenues, EBITDA, for these mini clusters, up to the clusters and up to the national level. So this is an example from one of our states, where you see that the green means that this cluster is already now profitable.
And then you see that there are some reds, and what we then do is that we either strengthen the distribution or we move out some of the base stations. Because we have the ability to take some of the radio equipment, knowing that we don't own the towers, and replace it into areas where we see that we can generate revenues and better business. And then we do that cluster by cluster until it's green. And when it's green, it's when we have that 20% market share, then we move into new clusters. And that's the way we have operate, and that's the way that the machine is built. You cannot take a local position if you're not good at this one. So what this means is that you are able to pump more traffic into your network than the industry standard is.
So if you look at the network utilization, even though our minutes, as I said, are much larger than the industry, we still have a 13% free space in our business, and this is measured in peak hours. So we still can grow our traffic significantly without hitting the ceiling. And the last two years, 2011, 2012, we have not invested in one single capacity sites. All the new investments have gone into coverage sites. The way we do this is that we are implementing some new antennas. We are also implementing automated radio planning tools. We are using not only half rate, but Quarter Rate in the network, and we have been able to actually innovate this together with the network vendors that we have, all four of them that we are using.
So with that, you see that we are basically using our Spectrum, much better than the incumbents. So this is Erlang, as you know, is a measurement on the traffic, so it's Erlang per site, per megahertz. That's how you can track how efficiently are you using your Spectrum, and how efficient are you in capacity management of your network. We were a late comer in India, and a lot of advantages with that. Because we could then there was no legacy in our network, and we could actually benefit out of a well-established outsourced market, which our competitors built. So our outsourcing is more extreme than any of the competitors.
For example, our IT deal with Wipro, there is no, there is no service integration layer between the ones that are delivering this and the ones that are actually owning the platforms and the servers. So we have a model which is cheaper. Take another example on the network. We have chosen to have multi-vendor environment in a network. There are different vendors delivering our equipments, different vendors that are running our network operation center, different vendors which are doing the managed services. And with this, we keep up a competition, price competition between all these people. That enables us to be cheaper. And you see that our model is actually almost an entire OpEx model rather than a CapEx model, wherein most of this is coming from the network.
This OpEx model enable us to also be quite dynamic, to scale our business accordance with the revenues. For example, that gray half 50% there, that's network rental, and it's and it's power, basically. So if a cell, if we see a cell site is not yielding any, any traffic or yielding any result, we are moving that cell site into another area, or we shut it down during nighttime to save power. So that's a way we can scale the costs according to how the business is going. And this is the result of some of these cost initiatives.
This is cost per minute, and you see that the incumbents, again, I don't want to name it, name them, but, despite them having 150 million customer plus and a huge scale advantage, they have now, according to official figures, INR 0.29 per minute. No, sorry, INR 0.29 per minute. We are now on the pan-India Uninor basis, lower than that, INR 0.24, despite much, much lower customers. If you look at our best performing circle, we are down to INR 0.15, significantly lower. So what this means is that these cost initiatives is actually overcompensating the scale disadvantage. And that's why I say that we don't necessarily have to go up to the same output as the competitors to, to, to meet similar margins. Okay, moving forward.
We have learned that India is a risky place to be. And we don't, we definitely don't foresee another Supreme Court ruling, but there's going to be continued challenging in this market. That's the reason why we have chosen to have a very, very high return on the new equity we put in. We started to look at participating in this new auction back in July, August. Then we saw where the auction rules were coming, we saw where the reserve price were coming, and we started to build a business plan moving forward. That's when we started to say that new money getting into this business need to have a 25% return on equity. And all those money that we have put in has that ambition.
Of course, this is much, much higher than what you normally will have in this type of business, but this is to justify the continuous risk we see in India. Currently, the entire funding of Uninor is through equity. When we get into breakeven status, we see that we will be able to lend money again in the Indian market. And of course, then this, the funding going forward will be debt without any recourse to Telenor. So that's the way we have looked at this from the more financing point of view. We have one short-term focus, 2013. We have made two very, very clear promises or statements that we made in 2008, four years ago.
Four years ago, we said three things: one, the peak funding of this investment should be INR 155 billion. Two, we should be EBITDA breakeven in three years into operation. Three, we should be cash flow breakeven five years into the operation. That was what we said four years ago. We are standing behind those, targets, and that's why next year will be really about, not exceeding the INR 155 billion, peak funding. And the way we are going to do that, it's, to finance some of the, INR 13 billion, license payment with a refund of what was paid back in 2008, that's the INR 16 billion, plus some tax benefits.
That's the way we are going to finance both what we paid in the license and also the money needed until we are breaking even in the operation. So the INR 155 billion stand. The other promise was to breakeven, and three years into the operation and five years on the cash flow, we are actually moving the cash flow breakeven a little bit, yeah, front. So rather than waiting five years, we will do it next year. So next year, the Uninor operation is targeting to meet cash flow breakeven. And as Fredrik said, we have been EBITDA positive in one circle already, two more are coming. And actually, November was the first month where the Uninor operation was less than NOK 1 billion in EBITDA loss, the first month in November.
So that's our short-term focus. We are going to keep what we said when we originally went into this investment. The more midterm focus is that we need to continue to build scale, so we need to build up the subscriber base, and you see the target there is to move up to 55 million in 2016. These are our accounting methods, by the way. This is because, you know, we are stricter than the Indian accounting methods. We count subscriber only on a 30-day activity basis. The way we do that is that we basically need to take 15%-18% market share of the net adds every month, which we have done the last two years, and we need to continue to do that.
The other focus area we have is on churn, and we need to take down our churn to the industry level, around 8%. As I said, we are down to that level already in our best performing circle. In addition to that, we will continue to bring down costs. We see that there are still some initiatives we can do to take down that cost per minute. And right now, that is the main focus, actually, to slightly increase the price per minute and continue to bring down the cost per minute. That's the focus. And then over time, also bring up or cut some of the, the difference we have on ARPU in relation to the industry. And consolidation, as I have said, we will look at from a rational and a value perspective.
Moving forward, we will also extend, of course, our footprint to cover more than 45%-50% of the population, but we have a very CapEx-like model. We don't have any towers, and there is oversupply of towers in the Indian market today, so this is all about radio equipment. So what we're going to do? The circles which we have exited, we have a lot of radio equipment which we will reuse. So there's basically very little CapEx needed in the years to come, and that's why we have a target now on a long-term CapEx to sales around 5%. So that's basically an OpEx.
The way we are going to drive this is that when a circle is breaking even, like UP East just did, then we tell them that as long as you stay above that breakeven point, you can start rolling out more base stations and capture down the extra cost you get from them until they are breakeven, but we do it gradually. Those of you that are not breakeven will not get any more CapEx before you actually are meeting that target. So just to summarize, we have had and will continue with an operational focus. We will bring the company to an operating cash flow breakeven in the end of 2013, and after that, our midterm goal is to continue to create value through the way we are working. Thank you.
Thank you, Sigve. Thank you. We are now ready to take your questions, so I invite Mr. Baksaas back to the podium and Sigve as well, please. We will start with the audience present and then from the ones participating on the phone. A kind reminder, please limit yourself to one question per person, with one follow-up question if clarification is needed. Please wait for a microphone to be passed over, and kindly introduce yourself, and don't be shy, ask questions.
Hi, it's Espen Torgersen in Carnegie. Just a clarification question. Back in 2008, it's my understanding that when you talked about M&A, potential M&As, and also mobile data, that would be separate business cases. Listening to your presentation today, I get the impression that that's not the case anymore. It's all about doing what you're gonna do within the limits and the financial targets you've given. Is that correct?
I don't know what kind of preciseness you're questioning there, Torgersen. But the point is, from an operating perspective, 2013 break even and INR 155 billion. If there is a consolidation idea that come to the table one time in the future, in the future, that doesn't in a way necessarily stays i n the INR 155 billion bracket. But how that might look or under what kind of circumstances is, of course, impossible to say anything about at this stage. And I could add, including the potential of seeing an additional auction in the short term, namely 2013.
Harald Øyen from SEB Enskilda. I'm a little bit curious on ARPU. I understand that you don't really like to talk about that. But, again, three years ago, you stood here and showed us a slide with a quite bullish scenario on the ARPU levels, which obviously has not materialized in the way that you foresaw. Let us put it that way, what kind of ARPU levels do you need in order to defend those 25% that you target here today?
Yeah, well, it's not that we don't want to talk about ARPU. So if I left that impression, then let me correct that. And you are right that we were too optimistic on ARPU when we invested in 2008, but so was the rest of the market as well. And I think when you talk about ARPU, first of all, you need to adjust for this multiple SIM market. Which means that it's not ARPU per customer anymore, it's ARPU per SIM. So right now, more important than ARPU, actually, for us, is to make sure that price per minute and cost per minute is starting to meet. And that's what our target is: to break even.
After that, it is to gradually move up that ARPU that you saw closer to what the industry average is. It's a little bit difficult to say exactly when that's going to happen, and it's also difficult to say what that ARPU will end up with, for two reasons. One, we don't really know how more we can drive down the prices. We are going to continue to do that, and we still think that there's a potential for doing so, and it's also dependent on how the industry is being rationalized more on pricing. We think that we will see some price initiatives now. Our feeling is that we definitely have seen the bottom of pricing in the Indian market, and we even think that you can increase the prices quite a lot without jeopardizing on the minutes.
We think that people basically now have way too many minutes, and they have an affordability to pay for what, more than they currently do today. So, our business plan is basically based on a very tough environment for the coming three years. We don't expect a significant industry ARPU development for the coming three years. However, after three years' time, we expect that due to both market rationalization through consolidation, but also through that the whole industry will start moving up, then when you will see some of these ARPU figures going up.
If I may have a follow-up. I'm curious on your personal role, Sigve, in India and how you, 'c ause currently you are MD, right? But you also have an Asian responsibility, as far as I know. So how will your role in India play out for?
Yeah, it's correct that I'm heading the Asian portfolio as well. And it's correct that for the last two years, I've also been the CEO in India. So I'm trying to balance that as good as I can. I'm the Chairman of the board of these other companies. And right now, I'm spending most of the time in India. However, I will say that the management team we have in India, it's a really, really competent management team. So you will see that I spend most of my time actually to try to be a part of what you call the business environment, talking to regulators, talking to politicians, trying to implement or influence the framework, and of course, I'm also a part of setting the strategy.
So it has been a challenging year with having both these two roles, and now I think we are into a little bit more stabilized future, and then we will see how we are going to organize and manage this in the time to come.
Fair to say, you've had a little bit of assistance.
Definitely.
Thank you.
Okay.
There's one coming.
Oh, go ahead.
Yeah, hi. Christer Roth from DNB. Just a quick question with respect to the upcoming auctions. The suggested 30% discount to the reserve price in Mumbai, does that make it attractive enough for Telenor?
O n the details on what will be needed, I think we are a bit, a little bit early on that. And, 30% is one goal. I think there has to be a bit more actually, in order to get, to get it all done. But remember here that city areas are in a way a bit differently structured when it comes to the combination of operators. Because city areas have traditionally lower number of frequencies available than the other areas. So, this is an overall situation we need to address when we see the final decision.
Just to follow up, do you believe that the auction will be held in time to actually continue operations in Mumbai? Or will there be some sort of stop?
There are a couple of things that needs to come in place before we can address that really. And that is, if we had all should participate, there need to be a continuation of the license that we already have. That one may will, of course, have to last until the auction is being held. And number two, the refund issue need to be resolved.
Well, just to add to what Fredrik is saying. I think you will have clarity on this during January, and that's where you will see the auction policies coming out for the next round. I think also what the government is trying to do is three things at the same time. It's 1800 auction for the four circles that didn't get any bid in the last round. And it's also a 900 auction for various circles, and it is an 800 auction. All these three will come. And I don't think you will know neither the reserve price nor the auction rules, nor the timing before end of January.
Any further questions? The media is also encouraged to ask a few questions now. There are no further questions from the audience, so then I can call upon the call conference host to introduce questions from the participants on the phone, please.
Question from?
Andrew Lee, Goldman Sachs.
Go ahead, please.
Morning, everyone. A couple of questions, just how or what you said relates to the rest of the group. Firstly, could we understand or could you reiterate your kind of M&A plans across the group? You've previously highlighted Nordic and kind of adjacent operations to your Asian assets. Is it fair to say there are limited opportunities to make any scale purchases in the Nordics? And do you still believe that Burma is the only real opportunity in adjacent Asian markets? And then secondly, given if that's the case, if there's limited significant expected change in the investment profile of your group CapEx, and within India, and with cash generation accelerating, should we expect an escalation and acceleration of your shareholder returns? Thank you.
The M&A profile doesn't change with this. What we've said before stands as it is. Generally speaking, Telenor Group has reached a size and a visibility in a number of markets and geographies that any speculation around any kind of assets will probably also reach speculation around Telenor. But we stick to the same description as we had to this before, and we will also maintain the same ambition as to pay also competitive shareholder returns in this industry. So there are no changes seeing this milestone being delivered the way it is.
Can I just ask a follow-up question on the just to clarify the on the on your peak peak loss of INR 155 billion? Does that or doesn't that include the the Mumbai Spectrum auction in January or the Spectrum auction overall in January?
The INR 155 billion is an overall framework that includes a potential participation also in this auction that might come early 2013.
Thank you.
Now we have another,
Next. Laurie Fitzjohn, Citigroup. Go ahead, please.
Great. Thank you. One question on the network side. Given the Spectrum constraints, at what point would you expect to start building capacity-based stations? And specifically, for example, how close is UP East needing capacity-based stations, given the customer numbers and current traffic? Thanks.
Well, as you know, currently, we have 4.4 MHz Spectrum in UP East and in all the circles, and then we will get a little bit more up to 5 MHz starting from January. And actually that small top up from 4.4 MHz to 5 MHz gives probably us another year. So there will not be a need for any capacity investment, even in UP East in 2013. I think most of the investment we'll be focusing on there, it's then on CapEx for expansion, also footprint expansion.
Great, thank you.
Next.
Andy Palmer, UBS.
Go ahead, please.
Yeah. Hi, guys. Just one question from me. I just wanted to, j ust a little clarity. On the 2008 license fee, can you just confirm whether you've actually received that money back? And if not, why you're so sure that you will receive it back, given certain news report. And then also, whether you could quantify actually how much you get or how much of the upfront license fee will be offset by the tax loss recognition? Thanks.
Let me begin on actually the last part of your question. We are not through on all the details on tax. This is a calculation on how tax will work when we deducted in like group tax accounts, including that on Norway, after the restructuring of the debt side last year or this year. As for the 16, that was the 2008 license fee up against the 13 payable upfront on this one. Sigve, we have a lot of statements and also some formalities to realize before we can, which explains why we are having this opinion.
Yeah. Well, let me start with, in the auction framework, it was very clearly stated that participants in this auction will be eligible for an offset. So that's clearly stated as a policy. The technicalities that Fredrik is talking about is that we participated in an auction on a different entity than the one that won the auction in 2008. However, it's the same majority shareholder. And in the dialogue we have had with the government on various levels, we have got very clear signals that as long as there is the same majority shareholders, that offset shouldn't be a problem for us. And it's on that basis, we are so fairly sure that this will happen.
However, we haven't got it, as of now, and this is something we are now actively working with. We're getting a final confirmation in the weeks to come.
Okay. Thank you.
Next?
James Britton, Nomura.
Go ahead, please.
Thanks very much. I've got a few questions on your return on equity target that I think is new today. When you talk about the 25% return on new money, can you just clarify what you mean by new money? Is it the remaining capital to be invested under the peak funding budget? And so if that's the case, should we be expecting at least an annual return of about INR 6 billion on the remaining INR 23 billion to be invested? Can you clarify that you are assuming a zero negative return on the historic capital invested? And then is the target predicated on injecting debt and reducing the equity component over time, which you presented on in the slides? Thank you very much.
Yeah. To the first question, new money is new money, meaning that all the money we, we put in from around August time, where we, where we start looking at this auction and where we're building an, business plan. So it's all the money, equity money we have put in since August, for continuing to fund operation and, and also the money needed until we break even. That's one part of the new money. The other part of the new money is the NOK 4.2 billion we put in as, as a part of the auction. Those are the new money. And, and that is the return win, because this is all equity money, and that's where we are looking at, the return.
To the second question, we foresee that the debt market in India is opening up for us, after we have broken even and after we basically have a profitable business going forward. And that's where the additional funding going forward will then be based on not at equity and not Telenor guarantees either, but a straightforward loan with no recourse on the Uninor or the company basis.
Okay, just a follow-up. Can I just ask what the return you're assuming is on the historic capital invested from the old money?
The historic amount?
No, what's the return on the old money that you've already invested in India?
Of course, that's not, that is not sort of a question I can take here now. There is a significant investment made. It is a significant base that has been built in the marketplace. That is from that base, we now inject more additional funds on top, which is a fairly moderate overall considered type of amount to bring the project into its next phase. And it includes, And the INR 155 billion, to be precise, then also includes the NOK 13 billion that was paid as upfront fees, which we will work and are pretty sure that will be refunded up against the 2008 license fee.
Okay, thanks.
Next?
Jakob Bluestone from Credit Suisse in London.
Go ahead, please.
Hi there. I had a question about profitability for the business. I mean, you guide for generating a CapEx sales long term around 5%, which is obviously fairly low, and a reflection of the business model and having a relatively CapEx-light approach. I guess the flip side to that is you probably have perhaps relatively higher OpEx. So I was wondering if you might be able to give us a little bit of guidance for what sort of EBITDA margins or operating free cash flow margins you think you can achieve, if I remember right, I think back in 2008, with a very different business model and a very different footprint, you were guiding for 30% EBITDA margins and 20% operating cash flow margin.
I was wondering if you might be able to update us on that?
I don't think I wanna give any update on that. I think we already gave quite some guidance on the CapEx, which is low, as you said, and we also have given some guidance on the return on our equity. So I don't think at this point in time, we would like to give more or disclose more numbers on how our business plan look like going forward.
Okay, that's great. Thank you.
We can, we can take that question when we have reached breakeven, then we can start.
I will come back.
Yeah, thank you.
Next?
Peter- Kurt Nielsen from Cheuvreux.
Go ahead, please.
Thank you. Good morning, Fredrik. Can I just return to the capitalization issue, please? How will you capitalize the new company? How much equity has been injected into the new company to date, before the auction fees? And from an accounting perspective, given that the assets were written down to zero, would there be a revaluation of the assets in the Indian operation? Or will you simply book the assets at acquisition value, i.e., the auction fee? Thank you.
There, we are, we haven't, hadn't thought that we should do any reevaluation. I think, any, if anything like that should happen, then we're probably in some kind of a consolidation game of some type. So that's that. As for the other details, I think I have to refer you to IR, Peter.
Okay. Thank you.
Next.
Ulrich Rathe , Jefferies.
Go ahead, please.
Thanks very much. Yes, it's a question about this business model and sort of the advantage you derive from that and how defensible this is. You sort of showed the value chain as essentially being, you know, sort of really under your own control, not outsourced, only at the strategy level and then at the sales front. On the other hand, you're making much of the cost advantage you're gaining from this, pinpointing the capacity to where the revenue is. Now, I assume from the chart, then this means most of that process is actually outsourced, which in my world means it's probably something that is sort of in the public domain, in a sense, and relatively easy to copy by competitors.
So, where's your confidence coming from that you can maintain this cost advantage that is so important to your business case?
Now, we assume that the competitors are also focusing, more and more on cost. They have done that already, and they will continue with that. Which means that we need to be just one step ahead in terms of, how can we innovate, this further. I think, long term, there is an advantage of us, having, no legacy. To do this with some of the current arrangement that the bigger guys have, will take them at least some time to get around. And, over time, we will also get a bigger scale and can start also utilizing some of the scale effects into that cost model. Because this, there is almost nothing in telecom that is, sustainable in the sense that as giving you a sustainable competitive advantage.
So, so you just need to continue to innovate yourself and, and continue to be very focused on what you do. I think that's, that probably is something I could have talked a little bit more on, also on the cost side. Of course, there is an advantage for us that we don't have any postpaid. We don't have any complex billing structure. We don't have any complex, way of handling cost, postpaid customers. We don't have 3G. So that extreme focus we have is also giving us advantages. So, so let me say that this is, as I said, this is our entry strategy. This is where we want to build up the business and build up the scale. And we probably need to get up to a 60 million-70 million customer scale.
And then, when we are on that level, then we also have to move into other areas. At that point in time, we need to deploy different strategies.
And as an example of that, to take the new registration procedure. As a newcomer in the market, we have the ability of rushing activation down to six to eight hours. Whereas competitors needs, for the time being, up to two to three days to execute an activation. And of course, that we know is not a sustainable advantage. It's a first mover thing that works good in a period of time. And later on, you need to develop other elements that you're against stays, t hat will enable you to again stay ahead of competition. That's market dynamics.
That, that's very clear. Can I just have one clarification on this talk about consolidation? Maybe to Fredrik. I mean, just in terms of sort of general capital deployment across your business portfolio in the group, would you say at this point that your appetite is more to increase economic exposure to India or decrease? I understand there's sort of lots of possibilities, but just in terms of sort of the big picture from a group perspective and where you allocate capital. Thank you.
We don't necessarily address that kind of question right now. The only thing we are focusing at for the time being is to get to breakeven with all our circles and Uninor organization overall, and with a break-even position in place as targeted towards the end of 2013, I think, we might have clear views on questions like that. But as for now, our focus is on operating issues, period.
Thank you very much.
Next?
Stefan Gauffin, Nordea.
Go ahead, please.
Yes, some of my questions has already been asked, but I'm curious about this new activation process, if you can give some more information on what has changed. And you talked about the impact of lower churn and less commission payments. So can you give some more information on what has been changed here?
That we can, because we have been watching it last week.
Now, let me just explain what it is first. What it is, is that when a customer go to a retail shop, he, or she need to fill out, a customer acquisition, form. And he need to give a picture, and he need to give an ID, and he need to give an address. Then he get a SIM card. Then that form, but the SIM card is not activated, he cannot use it. Then that form will travel to a distributor point, and that form will then need to be verified by one of our employees, or one of the other operators' employees. Then that form will be uploaded to the call center, and then the customer can make a call.
But the only call that he can get through is to a call center, and then he need to verify all that information that he has given when he got that SIM card in that retail shop. That's the process. So what's then happening here is that this is a process which will take some time, and as Fredrik said, we are down to five, six hours, I think, before this form is with the call center, and the customer then can call and get his card activated. So what is happening here then is that there has to be a real person behind that SIM and a real person behind that form, which has not always been the case in the future.
So this is dramatically bringing down the number of either customers that were never there in the first place, this was just pre-activated cards to get some commission, or people that went there just to pick up some SIM for free. So now it's more real customers, and that's where we see that the last month for the industry, the gross number is down between 50%-70%, just because we have taken away all these funny customers, to use that expression. So this is very much about processes. And the ones that are best on processes can take a short-term advantage on this, as Fredrik said.
Over time, this means that the gross game in India is going to be lower, which means that you basically pay less in sales and acquisition costs. There is less commission, there is less cost of subsidizing your SIM cards, there is less cost distribution costs. And that's why I think you will see that over time, the whole industry will benefit out of this, with actually having a positive cost effect on the EBITDA line.
This is a more cumbersome procedure, both for customers and for operators, and it will lead to people will take better care of their own SIM card.
Yeah
As they have it.
Time allows for two more questions.
Thank you. Next.
Sven Granberg, Dow Jones.
Go ahead, please.
Hello. I think you've answered some of the questions I had in the beginning. It was regarding your participation in the possible renewed auction in India. I was just wondering if you could outline exactly what you said. I mean, I understand that you'd find the 30% discount too little. And can you flesh out how much of a discount you would need to participate?
Nice try. Nice try.
I'm a reporter, so that's what I do.
We wouldn't be put a threshold on this, but if Telenor need will at all value this, we need to get the license refund in place. That's for one. And then, the reduction in the threshold needs to be put on a different level, which is lower than the suggested one. And from there onwards, it's all about market competition for that Spectrum.
If I just could add If I just could add, Fredrik, I think it, for us, will be two parameters. It will be, what can we pay in this auction and still be within the INR 155 billion? And second, it's, what is it yielding a net present value for that investment? Both these two things we will look at very, very rationally.
Exactly.
It's not only about the reserve price either. It depends also on what are they changing some of the auction parameters? That we don't know, and we will not know that before end of January. Also, we need to see the participation. If everyone is participating here, the reserve price it doesn't really matter, because then the realization price is probably be much higher anyway.
Exactly.
A follow-up question here. You, you need to be within your INR 155 billion funding limit here. I mean, what, what kind of room do you have in terms of how many billions of rupees are you, are you prepared to pay?
Oh, then I will repeat ourselves. Nice try. But on the other hand, I don't think we go into those details to be more serious about it. This is our evaluation when, when and if, the opportunity comes.
All right. Thank you.
Last question.
Amit Khatri, Mumbai, India, go ahead, please. Yeah, hi, thank you for the opportunity. Just, my question has been partially answered, like, if your model is easily replicated by the, say, incumbent or new player, what are the chances of tariff war again coming in India?
In my view, the chances for a tariff war to be more bloody than what we have seen so far is quite low. In my opinion, there we have seen the bottom of the tariff level. And I'm also basing this on what the incumbents already have done. They have taken up the tariffs. They did that a year ago, and if I should believe press statements, they are about to do it again. So and also, when I now see that the actual number of competitors are less, some have given up, some are scaling down. So I'm quite positive that you will see an increase there.
However, I don't think there will be a substantial change in this before we are through some more consolidation, and that may take some time.
That's true, but the competitors who have given up or are moving back out of India didn't have any real revenue, right? So given this, gap between your cost of operation and the incumbents, if operators, if incumbents are able to match your kind of cost, then there is ample room for another price war. And this, I just, want to understand this gap and how easily can, you know, be replicated by incumbents?
Yeah, I cannot answer it more than what I did. I think right now we are the most affordable in the market, and with the rest of the market. Smaller guys being gone, I think we are alone holding that position. And of course, we will not act irrational here. When we see an opportunity to move up our prices, we will do this, of course we will do that, as we did a year ago when the incumbents did. So we will be a follower in that respect. We are not going to be disruptive in the market, because at the end of the day, this is not about number of subscribers, it's about our profitability targets.
Thank you. This is actually the last question we could take. There's no more time. This concludes the session for today. Thank you all for joining us in the audience and online. Thank you, Sigve, and thank you, Mr. Baksaas. For media present, I'm coordinating an interview list for Mr. Baksaas, and my colleague, Glenn Mandel, is doing the one for Sigve Brekke. Thank you.
Thank you. Thank you.