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Telecoms regulator says no to further 3G delays

15 May 2003

Sweden’s industry watchdog the Post and Telecoms Authority (PTS) has rejected requests by mobile operators Telia Mobile, Tele2 AB and Hutchison Whampoa-backed Hi3G, for additional time to complete the rollout of their commercial 3G networks. The PTS said that whilst it was concerned that operators would not fulfill the network coverage requirements laid down in the licence awards, it did not feel there was sufficient reason to grant them a general extension. The operators have claimed that the deadline is unworkable, citing problems in obtaining planning permission for new masts, 3G hardware teething difficulties, weak consumer sentiment towards the new services and a poor investment climate which is hampering investment. Despite their protests the PTS has shied away from changing the deadline as it fears altering the terms of the licence awards could lead to legal action from companies which tried and failed to secure concessions back in 2000.

Under the terms of the awards made in December that year, licence holders are obliged to have coverage of at least 99.98% of the Swedish population by December 2003. However, it soon became apparent that operators were experiencing difficulties in meeting their commitments. In summer 2002 Orange announced it would struggle to meet 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, 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 turned down. The matter came to a head in December 2002 when Orange announced that it was withdrawing from the Swedish market altogether, claiming the coverage requirements were too onerous. The decision to opt out landed Orange with a bill for EUR109 million, its portion of the cost of building a shared 3G network with Hutchison and Vodafone. Despite the seemingly draconian stance of the regulator, it has attempted to soften the latest refusal by saying that it will not fine operators if they ‘do everything they can to build the network’.

The latest PTS edict threatens to turn up the heat in an already competitive mobile sector where high levels of mobile penetration are approaching saturation levels. By the end of 2002 Sweden’s mobile market had grown to number just under 7.92 million subscribers, taking the country’s cellular teledensity from 70.9% at the end of 2000 to 88.6%. However, having enjoyed a period of friendly competition and cooperation between players, the market is set to be transformed in 2003 by the imminent launch of ‘3’, the Hutchison Whampoa-backed third-generation service, and the withdrawal of Orange Sverige.

Source: CIT’s Datafile of European Telecommunications

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