UPDATED: NetCom’s mother company TeliaSonera almost doubled its share of the Norwegian telecommunications market on Monday with the purchase of Tele2 Norway. TeliaSonera paid SEK 5.1 billion (USD 744 million) for the acquisition, which increased its market share from 23 percent to around 40 percent.
The move increased TeliaSonera’s mobile subscription base to 2.7 million, reported newspaper Dagens Næringliv (DN). “The merger will lead to a more even power balance between the actors in the mobile industry and consequently improve competition,” said Tele2’s Norwegian operations director Arild Hustad.
NetCom’s chief executive August Baumann added it would be good for Norwegian consumers and businesses, putting the company in a better position to challenge rival Telenor which had a market share of over 50 percent.
DN reported the buyout was critical for Tele2 which had invested almost NOK 3 billion in its mobile network, but could only cover 75 percent of the population due to a lack of critical frequencies. The company has been in the market for almost 20 years, and has 1.1 million mobile customers. Hustad guaranteed 4G coverage to 98 percent of Norwegians by the end of 2016. NetCom meanwhile has 3.2 million Norwegians connected to its 4G network.
TeliaSonera expected the transaction would include integration costs of between SEK 250 to 450 million, and investments of SEK 350 million to handle the increased traffic, reported TDN Finans. It anticipated annual savings of SEK 800 from 2016 through streamlined costs. Tele2 meanwhile was set to gain around SEK 2 billion.
Good for Telenor, bad for competition?
Analyst Espen Torgersen at research firm Carnegie said the acquisition was a positive for market giant Telenor. “Now Telenor gets a large competitor which is willing to undertake significant investments and willing to build nationwide networks,” he told DN. “This is good news for Telenor, which has long been in a situation where they have invested heavily without getting so much of this back.” Telenor’s shares rose by 2.28 percent on Monday morning to NOK 143.50 each.
Telenor analyst Tore Tønseth at Sparebanken 1 Markets argued while a degree of inevitability surrounded the acquisition, it would ultimately result in reduced competition. The merger leaves only three major players in the telecommunications market: TeliaSonera, Telenor and to a lesser degree Ice. “There was previously a risk that there could be four players in the Norwegian market, but now there is going to only be three,” he said. “So in the long term picture, this will lead to less competition.”
“Tele2 Norway’s situation was in no way viable in the long term, so it was in many ways expected that a sale would come,” Tønseth said. “Nevertheless, it is certainly positive for all the players that are actually in place now.”
However, Tønseth believed the acquisition would have a negative short-term effect on Telenor, which would lose Tele2 Norway as a major customer. Tele2 and Telenor had entered into an agreement, because Telenor had access to the mobile network frequencies Tele2 lacked.
The acquisition remained dependent on approvals from Norwegian competition authorities. A decision was expected no later than the first quarter of 2015.