Orange riles Swedish cellcos

28 Feb 2003

Orange has set the cat among the pigeons with the revelation that it is considering transferring its Swedish 3G licence to a subsidiary, a move which competitors fear will allow it to wriggle out of having to pay its share of 3G network rollout costs. Vodafone Sverige and Hutchison’s 3 have sent a letter to the regulator the PTS, asking for the licence transfer to be stopped. The pair are worried that a transfer of the concession to a separate legal entity will allow Orange Sverige to effectively sell the licence. Orange Sverige could then declare itself bankrupt, thus avoiding having to pay a EUR109 million penalty fee.

The PTS awarded four licences to operate UMTS networks in December 2000. 2G incumbents Tele2 and Vodafone both secured concessions, as did newcomers Hutchison Whampoa and the Orange Sverige consortium, made up of Orange, Skanska, NTL and Schibsted. Orange quickly joined Vodafone and Hutchison in forming a network sharing company known as 3GIS, but in summer 2002 announced it would have difficulties in meeting the rollout requirements laid down by the licence and applied to the PTS for an extra three years (until December 2006) to meet them. It also requested that it be allowed to provide a reduced coverage of 8.3 million inhabitants, instead of the 8.86 million specified in its licence, only a 6% cut but one which would have meant not having to provide coverage to great swathes of rural Sweden. In September 2002, however, the PTS concluded that there was no justification for granting less stringent licence conditions and denied the request. In the same month a similar request from Vodafone was denied. The matter came to a head in December 2002 when Orange announced that it was withdrawing from the Swedish market, claiming the coverage requirements were too onerous. The decision to opt out led to its partners claiming it owed them EUR109 million, for its share of the cost of building the 3G network.