Jørgen Rostrup has over 20 years of international business experience across four continents.Prior to his current role as Head of Telenor Asia, he was the CFO at Telenor Groupsince November 2016. Rostrup has held management positions in three of Norway’s leading companies, including Country Manager for Yara Ghana Ltd., CFO for Norsk Hydro AS, Executive Vice President Energy in Hydro, and CFO for Hydro’s Norwegian oil and gas activity. He has also been on several boards, including positions within the private equity and investment banking area. Rostrup holds a Master’s Degree in Economics and Business Administration from the Norwegian School of Economics (NHH).
BR Research recently interviewed Telenor’s Asia chief, who was on a visit to Pakistan earlier this month. The discussion ranged from the Norwegian firm’s recent realignment in some of its Asian markets to its future in the Pakistani market. Selected excerpts are produced below:
BR Research: After the sale of Telenor units in Myanmar and India, mergers with local entities in Malaysia and Thailand, and reported difficulties operating in Bangladesh and Pakistan, it appears that the Telenor Group is in the process of retreating from Asia. How do you respond to this?
Jørgen Rostrup: We have been in Asia for 25 years since we began operations in Bangladesh. It’s been 17 years since we launched Telenor Pakistan. Currently, we have 165 million customers in Asia, so we are not leaving at all. On the contrary, we are strengthening our position in Asia. We believe that a new phase of growth in Asia is starting. The old way of adding new subscribers is less relevant, as the gross ad game is over in most markets. Industry players in our Asian markets are also more mature.
We arein the digital era nowwithrecent shifts both in the core technology (4G and 5G) and all the additional technologies that are bundled together to create a digital society. With these changes, we believe that having strong positions and significant scale in each of our markets is important to be a good player going forward.
We are now working with partners, where we have a common business perspective and then try to make a stronger situation out of that. We are trying to merge in Malaysia, and hopefully that will go through soon. And we are doing the same in Thailand, creating a number-one position for our business there, the same as we have in Bangladesh. We are not there yet in Pakistan, but we are working to be a strong partner in this market.
BRR: In Asia, how do you see the year ahead in terms of the impact of inflation, supply-chain bottlenecks, sluggish economic growth, and possible recession in some markets potentially impacting purchasing power of customers? How prepared are digital connectivity providers like Telenor to ride out the uncertainties ahead?
JR: We have, over a number of years, tried to make smart moves in order to secure good profitability, good cash flows and good dividends to our shareholders at the group level. We have a strong Nordic business as a backbone, both financial and technological, in an advanced telco market. We are creating a digital telco and modernizing our way of work. Currently, 100 percent of our traffic is going into the cloud, and the systems and networks are fully automated.
As you point out, the global and regional economic situation is volatile, and this impacts the telco industry,just as it does other industries. In the case of telco’s, it is specifically the maturity of the markets combined with developing-market risks in general, currency issues and investor sentiment. At the same time, if you look at our companies in the region, I believe that they are very fit to compete in this economic situation, as they are modernized, they are automated, and they are lean in their organizations.
BRR: Covid-19 may soon be entering the endemic phase, but scientists have warned that it will be a mistake to think of pandemics as a once-in-a-lifetime event. From your vantage point at the group level, what are the key takeaways for the future in terms of business-continuity-planning amidst large-scale disruptions?
JR: First, let me say that the telco industry has done a phenomenal job during the pandemic. There have been discussions about the quality of service, but I think the fact is that the telco industry has really handled well the surge in demand and the abrupt shift in demand patterns, where people’s digital footprint had changed overnight. And the telco industry, Telenor included, had to overnight pivot form being in our offices running our networks to running our networks from homes. And our companies, including in Pakistan, did that very quickly as we had a modern, automated and cloud-based system as a backbone.
Second, I think our portfolio companies in the region really accelerated the digital shift. We had started that journey earlier, but during the pandemic we were forced to fast-track it. Now, a third of all sales in Telenor Asia’s portfolio is coming through digital channels, which is a staggering number compared to where we were before. We have increased the offerings of our digital services, and those services have been growing. For instance, there has been 37 percent year-on-year growth in digital volume by customers in Pakistan, and we see similar growth figures in Bangladesh and other markets.
Thirdly, we have learnt that modernizationdoes not only apply to the technology stack but also to the way of work and business priorities.The modernization work that we did before Covid-19 really helped us during this time, and we will continue to modernize our business in anticipation offuture challenges. What we do know is that the more rational, leaner and more digital-oriented we are, the better it is. We need to continue to build on the digital shift for our customers, and develop those networks that have proven to be crucial during the new challenges.
BRR: Let’s now pivot to the Pakistani market. How would you frame the strengths of this market in comparison with other markets in your portfolio? And what sort of challenges distinguish this market from the rest?
JR: Let me put it this way: we really like to be in Pakistan. Pakistan is a good place for us to be, and we have been here for a long time. We have a very strong operation in Pakistan. The culture, the atmosphere here is good, and we also have very capable teamworking here and in other markets, which we have really benefitted from. There are many aspects of Pakistan that make it an interesting market. It is a market with a huge, young population, which is of course interesting, especially from the digitalization perspective.
There are challenges, as with other markets. The currency is weakening for quite some time now. There is also a growing lack of predictability operating in Pakistan, which affects foreign direct investment as investors need stability in order to invest.
BRR: At the Group level, how do you view the current state of Pakistan’s legal and regulatory environment, especially concerning issues such as investment facilitation, license renewal process, taxation-related issues, availability and sale of spectrum, etc.?
JR: It is a tough task right now for the government on the taxation front, and it’s been like that for a while. That’s our starting point and we sympathise with that. We are happy to pay our taxes globally – we ensure that we pay taxes whereverour revenues are generated in the local market. And we also try to participate in other ways as a good corporate citizen.
The dilemma in Pakistan is that on one side the expectations of telecom operators are sky-high, which, in a way is a privilege as people are focused on our services. On the other side, the reality is that the whole telco industry in Pakistan is making too little money; it’s not profitable enough for the investment level we need today or tomorrow. The Pakistani market has probably the lowest average revenue per user (ARPU) and highest tax rates, at least in the markets where we operate. That doesn’t work, especially when there is the currency dilemma, where we pay for spectrum and equipment in dollars while we are making revenues and returns in local currency, with the gap between the two becoming bigger by the day.
Pakistan needs strong players, both large and small,to execute on its digital agenda in partnership with the government. One thing I would emphasize here is that expanding the tax base, to have more taxpayers, should really be the focus area as opposed to increasing the burden on those who are being taxed already.
BRR: What are some urgent measures and long-term reforms that the new government in Pakistan can start today to improve the ease of doing business for the telecom sector?
JR: It is really important to have spectrum made available by the government in good auctions at affordable prices in good packages. My impression is that the government and the regulator understand that, but sometimes it does not work out at the time of the auction. Over time, this issue needs to be handled from all parties in a good way, and that is crucial. Then, in general, making it easy to do business should be on every government’s list of actions: everything from administrative issues to automation and digitalization.
BRR: Spectrum pricing has been a major contentious issue over the years. What, in your opinion, could be reasonable criteria to price the spectrum?
JR: I cannot comment on anything specific regarding spectrum pricing. I would say that we are, just as other players, working very systematically and thoroughly with spectrum processes in all markets as it is an important and core part of our assets and operations. These are difficult, high-value decisions.
With an increasing demand for digital services and mobile internet, it is important to have economical access to spectrum to support network developments and upgrades, both in terms of pricing and availability of spectrum. This is something I hope everybody is reflecting on.
BRR: Short of government facilitation on those issues, and considering the revenues are declining in real terms amidst growing challenges, how can the telecom industry in Pakistan tackle these issues and put itself on a growth trajectory?
JR: That’s a good question. I believe that the telecom industry at large and Telenor Pakistan in specific are not asking for concessions. What we are pointing out is that there must be a positive investment case on the table for us. The cost of capital to operate in Pakistan today is higher than the return, which means we are losing a little bit of money everyday. That is a situation whichall stakeholders need to collectively address. We need to find the market balance, and right now we are not there.
BRR: Climate change is a growing reality, and organizations are quickly becoming conscious of the impact they leave behind. Pakistan is amongst the most climate-vulnerable countries. How has Telenor factored in climate ambitions in its operations, and how sustainable are they?
JR: Climate change is a big and important issue for all of us. At Telenor, it is high on our agenda. The telco industry has its challenges here. For instance, digitalization often implies increased energy consumption, due to significantly more data usage per customer. So, it is important to find solution for this issue. The industry is meeting some of this challenge by working to produce data more efficiently,for example by investing in new technologies.
At Telenor, we are also increasingly focused on where the electricity that we use comes from. For Telenor, this means committing to long-term contracts which support the financing of green energy. At the same time, we are looking at using more renewable, locally-generated energy, which is most often solar energy in the case of Asia. The bigger picture, of course, is to help governments and energy companies to develop greener grids. We cannot do that as a company alone, but we are exploring that in our markets with other players.
BRR: In the end, there has been an increased focus on health and safety across the corporate world during the times of Covid-19. What have been somethe significant sustainability initiatives at Telenor that are changing people’s attitudes and perceptions of health and safety?
JR: Since I started in this position two years ago, health and safety has been a high priority in our Asia operations. Telenor believes that getting people home safely from work is the most important thing that we need to ensure. We are working together with our vendors, suppliers and partners. Telenor Pakistan has really picked up the challenge I have given them. They are running a broad set of measures to further develop in their maturity on this topic. It goes to a lot of practical things: how honest we are in reporting, how we are following up on training, how we set up the standards, etc.
In the end, it is about culture, as it is about understanding, appreciating and really supporting the importance of health and safety. Taking health and safety seriously is critical from three main aspects. First, it is our moral responsibility – we need to do all we can so people are safe and feel safe at work. Second, it is good business, because if you don’t do this, you will have distractions and lot of issues to deal with. And third, there is a personal argument – focusing on health and safety helps to develop modern, professional managers and leaders. I see good development in that regard.