Finnish mobile operator Sonera will cut back its 3G plans.
Finnish incumbent mobile operator Sonera on Monday announced that it would scale down its 3G operations. It will reduce its stake in German licenseholder Group 3G, and in future it will only bid for licenses closer to home, in the Baltic region. Unlike BT’s recent withdrawal from the Italian mobile auction, the move is unforced – Sonera has been very effective at building successful alliances with other telcos and winning licenses. Indeed, earlier this week the company gained access to a cut-price license in Italy as part of the Ipse alliance.
If any smaller operator were going to emerge as a significant player, it would have been Sonera. Its links with Nokia, and Finland’s early adoption of 3G, leave it in a good technological position. A survey earlier this month described it as the mobile operator in the best position to compete in new mobile business.
So this decision seems to confirm that the risk associated with 3G mobile licenses is so great than only companies with ready access to funding (requiring a large customer base, or substantial non-mobile operations) will be major pan-European players. With the Finnish population at only five million, Sonera does not have this advantage. And whilst its strategy of taking minority stakes in alliances looked good when mobile stocks were booming, it now looks like too much risk for too little control. Investors agreed – the company’s shares rose by over 10% on the announcement.
So what of the company’s future? Sonera looks unlikely to remain independent for very long; even its management believes it is too small to survive alone. Its high market penetration and new technology skill make it an attractive target for many companies. Telefonica is perhaps a good bet, since the companies already work jointly in Group 3G. But it is by no means the only contender.
The other likely candidates are also the European giants: BT Cellnet, Vodafone, France Telecom / Orange, Telecom Italia, and Deutsche Telecom. With large incumbent market share, they are poised to further dominate European telecoms, ruthlessly hunting down smaller operators whenever it seems worthwhile. Sonera will make a good trophy for any of them to take home.
