Country profile—Sweden

Although the market was deregulated in 1993, dominance in the local market still firmly belongs to former incumbent Telia. At the end of 1999, Telia controlled 87% of the country's 6.74 million fixed lines. However, the regulator Post&Telestyrelsen recently implemented a number of competition-enhancing measures including pre-selection, number portability for fixed line, and international prefix.

By Stephanie Heney, with a foreword by Peter Zeitler, a telecoms industry consultant, who spoke at this year's ‘Swedish Telecoms' conference by Smi

Table of Contents
Foreword
Regulation
Events
Players
Acknowledgement

Foreword (Back to top)

The Swedish telecoms market is considered to be among the most liberal and advanced in Europe. Its industry faces several challenges in the times ahead—not least in the development of UMTS or 3G services. Independent research has shown that by the end of last year there were 5.1 million mobile users in Sweden, representing a 58% mobile penetration rate. More than 40% of this base is prepaid subscribers, an area that is growing rapidly. With such high mobile penetration, the launch and development of 3G services is key, not only to the mobile industry but also to the Swedish economy as a whole.

The original schedule for the launch of 3G services in Sweden called for licenses to be allocated by the regulator in December this year. However, this date was brought forward, perhaps encouraged by the successful allocation of licenses in other countries, and the decision on which companies will be granted licenses will instead be made by November. The licenses, valid for fifteen years, will be decided by a "beauty contest" rather than a straight auction as happened in the UK. It is noteworthy that the Swedish regulator, having seen other allocation methods has chosen this method, which supposedly benefits the consumer more than the government coffers.

As many as four UMTS licenses will be granted, but, uniquely, two of these licenses will also allow the operator to provide GSM-based services. I believe this is because the Swedish regulator, again acting in the interest of the consumer, believes the current GSM market not to be competitive enough. Indeed, Swedish mobile phone subscribers pay more than in any other Nordic country, and there are currently only three cellular networks. Present holders of GSM licenses will be excluded from applying for the two 3G/GSM licenses on offer this year. Although no firm decision has been made as to whether national or regional franchises or a combination of both will be awarded, the regulator supports regional licensing as bringing greater benefit to consumers.

Creating a competitive environment to support 3G services is vital to their success. Analysts predict that by 2010, 57% of all cellular revenues will come from 3G voice and data services. I believe that many European countries where the deregulation and 3G license granting processes are not advanced can benefit from analyzing the Swedish model. It is rare that the telecommunications regulator can have such strength in representing consumers' interests. Oftel in Britain is a case in point. It has recently been heavily criticized for its "weak" guidelines on the unbundling of the local loop.

Peter Zeitler, senior consultant, ICL

In Sweden, there are approximately 6 million subscribers to fixed telephony services, not including business lines. Of the six million, 4 million are private subscriptions and 2 million are commercial subscriptions. Virtually all households are still connected directly to former monopoly holder Telia. There are approximately 4,000 subscribers who are directly connected to another telecom operator, of whom 50% are households, and 50% are commercial subscribers.

The mobile network in Sweden is still mostly used for speech traffic, but mobile data traffic totals around 5% of all traffic and is rising. There are three GSM networks in Sweden.

The Swedish regulator Post&Telestyrelsen (National Post and Telecom Agency or PTS) is issuing four UMTS licenses this year via a beauty contest. In May, applications were invited, and the deadline for applications is the beginning of September. Licenses are expected to be allocated in November 2000. Applications will be considered in two phases. Initially, the regulator will consider the financial and technical feasibility of the applicants, and the second phase will focus on the development of the network.

At the end of last year, there were around 2 million dial-up accesses to the Internet in Sweden, which is a 30% increase from the previous year. Added to this, there are a further 3,800 connections via leased lines and around 40,000 via other forms of access such as ADSL and cable.

Regulation (Back to top)
In an attempt to boost competition in the Swedish telecoms market, last year the National Post and Telecom Agency came up with three proposals for legislative amendments:

• Obligation to lease capacity on mobile networks.
  
• National roaming within the mobile network.
  
• Obligation to lease access networks.

As a result, Sweden had more than 1.4 million pre-selection and prefix customers at the beginning of 2000, and the number of telecom operators offering fixed telephony has doubled in one year. The biggest event last year was the introduction of pre-selection, meaning more competition and falling prices. Local loop unbundling has proved more problematic as the legislative proposal for this is undergoing investigation as to whether this would conflict with the Fundamental Law on Freedom of Expression, meaning any introduction of local loop unbundling is currently postponed.

Events (Back to top)
One of the biggest events in Swedish Telecoms recently was the much-publicized non-merger of Sweden's Telia and Norway's Telenor. In what would have been the sixth largest company in Europe and the first merger between two state incumbents, the world witnessed a bizarre set of events that included Telenor not showing up to signing ceremonies and reacting badly to Sweden's Jan-Ake Kark's appointment as the new company's chief corporate advisor. What ensued was a power struggle between the two companies, and Norway saw Kark as a threat to the new group's executive, Tormod Hermansen. The merger collapsed amid bitter cross-border wrangling as the board of Telia-Telenor became split nationally in a dispute over siting of key units. The failed merger cost around $59.2 million.

In April this year, the Swedish government announced that it was going to be the first in Europe to provide funding for an alternative broadband access network for its citizens. The national electricity grid will lay the backbone network, which will extend to every town in the country and link local networks partly funded by the government.

In May this year, Swedish broadband network operators, Telia, Utfors, and Tele1 decided to jointly build a broadband network. The $30-$60 million contract was given to construction firm, PNB, to lay broadband fiber optic cables on the Swedish coast.

Earlier this year, the Swedish government set a price range of 70-92 Swedish crowns per share for its IPO of 30% of Telia—the largest Swedish sell-off ever—valuing the company at 210-276 crowns ($22.90-$30.10 billion). The government will eventually sell off 49% of the company. Telia has just abandoned plans to sell its cable TV business, called com hem, as a result of poor capital market conditions. Instead the company will be floated.

In June this year, Motorola opened the first of its planned global network of wireless Internet applications centers in Stockholm, Sweden. Aimed at providing applications specialists with support, training, and interoperability testing, Motorola hopes that industry developers will use its test networks and handsets to create new services for 3G mobile networks.

Telia has just acquired a controlling 56% stake of Norway's NetCom ASA. A surprise $2.6 billion bid overtook Tele Danmark, which has a 40% stake. Telia is now seen as a white knight, as NetCom had been fending off a hostile bid from Tele Danmark. The acquisition is a boon for Telia because it lacked a significant presence in Norway, and NetCom is the country's second largest mobile operator and main competitor to state incumbent Telenor.

The Norwegian acquisitions continued in 2000 as Swedish mobile operator Tele1 Europe bought a 92.7% stake in Norway's ELTele Rogaland—a data and broadband operator—for 717 million crowns ($83.44million) from Norwegian power firm Lyse Energi. The payment will be made up from 100 million Norwegian crowns in Tele1 Europe Holding AG shares and the rest in cash.

Players (Back to top)
Telia is the largest party in Swedish telecoms. It offers every service a telco can offer in Sweden and is also unique in that it offers direct connection for fixed telephony services for domestic and small enterprises through the availability of the access network. The company provides local and long-distance service over 6 million fixed lines; it also has about 2.5 million mobile phone subscribers and provides Internet access to 620,000 Swedish customers. Telia's networks reach the European continent, the Americas, and Asia. Telia has telecom investments in 30 countries, including the Baltic states and major European markets, but plans to sell its holdings in Brazil, Asia, and Africa. The Swedish government owns 70% of Telia.

Tele1 Europe Holding offers data, voice, and Internet services to large and medium-sized enterprises in Sweden. The company aims to provide bundled services that include fixed and mobile telephony, data communications, and Internet access. Acting as a service provider for Telia, Tele1 has been able to offer mobile telephony services since 1999. Along with Utfors and Telia, the company is building a fiber network of 110km between Norrtälje and Haparanda. Many of Tele1's 8,000 customers are able to directly connect to the company's fiber optic networks.

Telenordia is a consortium between BT, Telenor, and Tele Danmark. The alliance has held licenses for voice telephony and leased line services since 1994 and started activities in 1995. Telenordia focuses mainly on its 40,000 business customers, but the company does offer Internet access and voice telephony to the domestic customer. Telenordia started offering mobile services this year.

Europolitan is a wholly owned subsidiary of Europolitan Holdings AB, which is owned by Vodafone AirTouch. Europolitan's GSM network was set up in Sweden in 1992 and has always focused on a customer base that has high traffic volumes. Another subsidiary of Europolitan Holdings is Europolitan Stores, which distributes mobile phones; at present it has 35 stores in Sweden. Europolitan is the second largest telco in the Swedish market for mobile telecommunications.

NetCom has various subsidiaries, including Tele2, which provides wireline services to approximately 1.5 million customers in Denmark, Norway, and Sweden. NetCom also provides 1.5 million customers with a GSM service and cable television to 300,000 in Sweden. Subsidiaries NatTeknik and Datametrix design and construct call center systems, networks, and mobile infrastructure. NetCom has just purchased the 82% of Societe Europeenne de Communiation (SEC), which it did not already own.

Contact: Post & Telestyrelsen
P.O. Box 5398
S-102 49 Stockholm, Sweden
Tel: +46 8 678 5500 Fax: +46 8 678 5505

Acknowledgement (Back to top)
This article from the September 2000 edition of the European Telecoms Intelligence Bulletin was reprinted with permission from SMi Publishing.