Telia’s share price has fallen by 20% following its failure to acquire a 3G license.
Following Saturday’s decision to deny incumbent Swedish telco Telia a 3G mobile licence, the operator’s share price yesterday fell by almost 20%. The company was almost universally expected to win one of the four licenses being awarded, but the Post and Telecoms Agency decided that its business plan was too weak in comparison with its competitors to justify awarding a license. Telia’s anticipated infrastructure spending was less than one third of rival applicant Hi3G and it planned on building only 4100 mobile base stations compared with other operators’ 20,000.
Instead, licenses have been awarded to the other two incumbent mobile operators, NetCom’s Tele2 and Vodafone’s Europolitan, as well as the new entrants, France Telecom-backed Orange Sweden and Hutchison-backed Hi3G.
The news is a disaster for Telia. It is the only incumbent mobile operator to have been refused a license. As a 2G operator unable to offer a full portfolio of mobile multimedia and mCommerce services, Telia will lose out commercially and financially to its rivals. It will also be unable to benefit from the capacity boost the additional spectrum would have provided, one of the key advantages in moving up to 3G. To make matters even worse, if market conditions remain the same, it will now have to compete against four rivals instead of three.
Telia now faces an uphill struggle to restore investor confidence and secure its future. It could buy out one of its rivals, but Orange, Vodafone and Hutchison are all most unlikely to withdraw from a major market. It is left with three possibilities if it is to implement 3G: a deal with NetCom, expensively leasing capacity from another operator or allow its mobile division to be taken over in some form.
The last of these may be the best way for the Swedish government, Telia’s 70% shareholder, to recoup some of its losses since Telia’s shareprice slump. There is already a trend towards separating fixed telecoms and mobile businesses, as can be seen from BT and AT&T’s restructuring plans and Irish incumbent Eircom’s decision to sell Vodafone its mobile operations. Sweden’s new operators, which both have deep-pocketed backers, might well welcome the chance to acquire Telia’s huge customer base.
