Sweden Sees Full UMTS-Coverage in Three Years

date: 17th December 2000

Sweden awarded third-generation (3G), or UMTS, mobile phone network licenses on Saturday, saying cellphone users all over Sweden would be able to access the Internet on the move within three years.

The Swedish Post and Telecom Authority (PTS) surprisingly rejected a bid by national operator Telia -- a decision that could hit the company's share price on Monday.

The PTS gave licenses to Telia's domestic rivals Europolitan , part of Britain's Vodafone Group Plc, and Tele2, the cellular arm of Netcom which bid together with Societe Europeene de Communication.

The Orange consortium made up of the mobile arm of France Telecom, a joint venture between Bredbandsbolaget and Internet firm Framtidsfabriken, Skanska, NTL and Schibsted also won a license.

The fourth went to the Hi3G Access group made up of Investor

and Hutchison Whampoa. Hutchison earlier this year won 3G licenses in Britain, Italy and Austria.

``Within three years, 99.98 percent of Sweden will have UMTS-coverage,'' Swedish Industry Minister Mona Sahlin said.

The PTS based its selection on evaluations of applicants' financial strength, technical feasibility, roll-out speed and commitment to geographical coverage. Ten groups representing a total of 30 companies took part in the so-called beauty contest.

Full Cover

Orange's network would cover the entire Swedish population by 2003, Chief Operating Officer Michael Latimer said.

``With our roll-out plan, we believe that Swedes will be among the first in Europe to be able to take advantage of the new technology,'' he said.

Orange said it has a global vendor agreement with telecoms equipment makers Ericsson, Nokia and Alcatel and expected no delivery problems.

Sweden's selection model made its licenses cheaper than the over $177 billion pledged by operators for 3G-network rights auctioned in six European countries this year.

License holders are expected to be spending as much again on UMTS infrastructure. The overall costs have lately sparked stock market worries about massive debt loads piled up by carriers.

The Swedish license winners will be charged a nominal fee of 100,000 crowns ($10,310) each plus 0.15 percent of annual turnover. The Swedish government believes the relatively low costs of its licenses will speed up the development of UMTS services and reduce customer charges.

The PTS said Hi3G Access had pledged $3.58 billion, more than any other bidder, to build a network.

``We believe that in reality it will be cheaper than that through cooperation on roll-out with other license winners,'' a Hi3G Access spokesman said. Operators may partly share networks.

Tele2 outlined a 25.6 billion crown UMTS budget, according to the PTS, but now expected to spend over 11 billion crowns and saw UMTS operations turning profitable in seven or eight years.

Telia To Appeal

In addition to Telia, which said it would appeal the PTS's decision, international heavyweights such as Deutsche Telekom of Germany and Spain's Telefonica were among unsuccessful applicants for a Swedish UMTS license.

PTS director-general Nils Gunnar Billinger told a news conference the agency had found Telia's application lacking in many respects, among these geographical coverage.

``We feel that their shortcomings are considerable,'' he said, noting Telia would need to increase three-fold the number of base stations it had planned to build. Base stations relay signals between cellphones and fixed-cable phone networks.

``My immediate impression is that Telia's share price will react negatively on Monday,'' Stefan Olsson, telecoms analyst at Swedish brokerage FischerPartners, told the press.

``It is incredibly important for Telia's Nordic mobile strategy to have a 3G network. If their appeal does not get a favorable response, they will be in big trouble,'' he added.

On Friday, Telia's share closed at 59.5 crowns, down 30 percent since the company's floatation in June. The stock has performed roughly on a par with the EuroStoxx telecoms index.

``We will review our application once again, and then make an appeal,'' said Telia Senior Executive Vice President Kenneth Karlberg.

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