 | | Telenor's Kjell Morten-Johnsen |
Norwegian company Telenor still holds the record in Serbia because it invested the most money in the privatization process. Today it is considering expanding its activities in our market. At this moment is it concerned above all by the state tax on mobile telephone use, because it is the reason why it is investing less in development.
Q: Several months have passed since the introduction of the special tax on mobile telephony use. What is your view of this tax now?
A: I think that it is essentially wrong. The fact that an industry is burdened is wrong. There are two companies that have invested huge funds in the mobile industry in Serbia and of course it is wrong to single them our and punish them at a moment when in any case we are al feeling the consequences of the economic crisis.
Telenor in Serbia has been written off a value of EUR 220 million this year because of the economic crisis and this tax. This is a pure loss for the entire Telenor Group. If this tax were to be abolished at this moment, even greater damage could be prevented. However, if it remains in force, it will send a bad signal to other investors, including Fiat, that Serbia is not exactly predictable for investment.
Q: Did you discuss this with representatives of the Serbian government?
A: Yes, we tried to point out some positive sides, in that sense I mentioned the study which clearly showed how we can help by giving to society, not only in Serbia but also in other countries. And this does not apply only to Telenor but also to other companies. This industry should be allowed to develop, because it is the basis for many other fields and for increasing the efficiency of the economy. If you let us work properly, the entire economy would greatly benefit from that.
We are trying to convey this message to the government in every opportunity, during meetings, as well as at other forums. I have to say that many people in the Serbian Government agree with us. It is a fact that the crisis came very suddenly and that it was necessary do make some difficult decisions, this we acknowledge. This is precisely why I say that if this tax is abolished at this moment and we are able to continue where we left off, serious harm could still be avoided. There are very few arguments left in favor of keeping it.
Q: In previous days in the media there was much speculation on whether you will be joining the race for the second fixed-line operator. Have you made a final decision or are you still weighing it?
A: We are primarily a mobile operator, and in many countries we also offer broadband Internet services. In the Scandinavin market we also offer fixed-line telephony services. Whether we will be interested in fixed-line telephony in Serbia or not greatly depends on the terms, and they are still not defined or published. Therefore, at this moment I cannot give you a final answer on whether we are interested or not.
What I can say is that the level of our interest would also depend on whether we would be able to use the existing networks throughout the country and for them to be truly liberalized. And if It is necessary to invest in order to get the license and develop this aspect of operations, that would greatly depend on the level of the predictability of the economy.
An important step in this sense would be the abolition of the special tax on mobile telephone use, because that does not inspire trust in doing business in this country.
Q: Do you have any new services for users that would opt for Telenor as the fixed-line telephony operator, if you do choose to do so?
A: Traditionally in fixed-line telephony you offer calls, and there has been nothing new there for 100 years. Then you have an increasing number of people using broadband Internet via ADSL, etc. O ur main approach in most markets is to offer mobile technology services, because it allows people mobility with fast access to information, and this requires significant investments.
Therefore, there are no special new services that fall from the sky, but rather this is primarily an issue of speed with which you wish to deliver them. In this sense, I would like to mention the Internet study which we recently conducted in collaboration with the Boston Consulting Group, which shows that the fast and timely introduction of Internet and broadband technologies in Serbia would lead to the creation of around 100,000 new jobs and an increase in GDP by around 5 percent within ten years.
Q: There is talk that a fourth mobile operator could soon enter Serbia. What is your view of this? You will have grater competition.
A: This decision is entirely up to the regulatory bodies, and this doesn’t concern us. Realistically speaking, I think that no great player will be interested in the fourth license, because there is a limit on the number of operators that can successfully operate in one market. this applies to many other markets, too. It is highly unlikely that there will be more than three players in Serbia, considering the population size. Even in a large country such as Russia there are only three large mobile operators, and one to two smaller ones.
Sweden has approximately the same population as Serbia and there too it would not be easy to introduce a fourth operator. You have to enter this market while it is still developing and while it has growth. Data indicates that the number of mobile telephone cards in Serbia is already greater than the population.
Q: Are you pleased with doing business in Serbia?
A: Generally we are. The business is developing rather well, not as well as we expected, but we are here for the long run.
Q: Why is it not developing as you expected?
A: Precisely because the economic crisis broke out and we are feeling its consequences.
Q: Is that the main reason or is there any other?
A: No, I’d say that this is the main reason. I don’t want to blame others for us not achieving the growth that we had hoped for. But this is the consequence of the crisis and we have seen this in the surrounding countries, especially in countries in central and eastern Europe, and also so some extent in Asia and the Nordic countries.
Therefore, Serbia is not unique in this way. In Serbia we have around 2.9 million users, and when they are doing well, we are doing well too. When they are not doing well, that of course affects us. And that is normal.
Q: Is the reason for the drop in Telenor’s investments in Serbia precisely the tax introduced by the Government?
A: We have to justify our investments in Serbia. During a crisis we have to reduce costs and investments. And if we have to pay an additional tax for every dinar, then we have greater pressure on the sums that we allocate for capital investments every year. This year we are investing less than last year and we are very economical. And the greater the tax that we pay the more we will have to control employee costs and investments.
You must bear in mind that we are already paying many billions of dinars in taxes, and that we invest several billions of dinars in the Serbian economy every year, in addition to what we have invested. This investment has to be profitable. We are a publicly traded company and we have to operate in a market economy.
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Insight 
