In news that will come as no great surprise, Nordic carrier group Tele2 on Monday agreed to sell its Norwegian business to TeliaSonera for an SEK5.1bn (€500m). It's been known the company was mulling an exit from the market after failing to win any spectrum in an auction late last year.

James Middleton

July 7, 2014

3 Min Read
oslo-norway
Tele2 is exiting Norway

In news that will come as no great surprise, Nordic carrier group Tele2 on Monday agreed to sell its Norwegian business to TeliaSonera for an SEK5.1bn (€500m). It’s been known the company was mulling an exit from the market after failing to win any spectrum in an auction late last year.

The divestment delivers an attractive value for Tele2 and will generate a capital gain of approximately SEK2bn upon expected closing, the company said.

Mats Granryd, President and CEO of Tele2 said: “Since we formed Tele2 Norway in 1995 we have built a successful mobile business of 1.2 million customers. However, the competitive constraints we faced without resources on the multiband frequency required us to evaluate different options for our Norwegian businesses. Whilst we have not been able to complete our originally desired strategy, the proposed deal is good for our customers, shareholders and for Tele2 as a whole. This is an attractive transaction at a good valuation and it enhances our opportunities to challenge and take new steps on other markets.”

Following the auction in December, Tele2 said it was evaluating a number of strategic options for its Norwegian operations having failed to win any spectrum in the latest Norwegian frequency auction, leaving it at a serious disadvantage in the market. At the time specialist consultancy Coleago said that Tele2′s failure was a direct result of the auction format.

Norwegian regulator, the NPT, used a first price sealed bid format for the auction and Tele2 gambled that it would outbid any potential new entrant. In a first price sealed bid auction bidders effectively bid blind, with the highest bidders paying the amount they each bid. In such an auction it makes sense to bid less than the value you place on the spectrum, Coleago said, something game theorists call “shading your bid.”

But a new entrant, subsequently revealed to be backed by the owner of Norway’s rural-coverage focused challenger Ice.net, won the largest spectrum haul in the auction. Then in May, the company signed a national roaming agreement with Telenor Norway for 2G, 3G and 4G connectivity to enhance its offering, a move also paving the way for this latest announcment it seems.

Bengt Nordström, a Scandinavian mobile strategy consultant, thinks the whole process could have been handled better. “This is the predictable result of a pretty miserable and failed spectrum licencing process, which has resulted in pretty dramatic consolidation,” he said.

“Norway now essentially has two strong operators, plus a very small outfit with lots of spectrum, little infrastructure and few customers. It seems like a good deal for TeliaSonera, and Tele2 shareholders will get decent returns. But it’s a timely reminder for the mobile industry that poor regulatory decisions can create uncertainty that makes a mockery of huge infrastructure investments.”

Tele2 Norway had net sales in 2013 of SEK 4.1bn and an EBITDA of SEK121m. The customer base amounted to 1.2 million and the operations had 432 employees at the end of 2013.

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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