Telenor Sweden

Mobile telephony and mobile broadband is offered on a retail basis to both the business and consumer markets through the Telenor brand. In the consumer market, Bredbandsbolaget provides high-speed fixed broadband for Internet access, telephony, digital-TV and add-on broadband services, as well as mobile broadband, and Glocalnet provides fixed and mobile telephony in addition to fixed and mobile broadband. In the business market, Telenor Sweden also offers fixed network data communication, telephony, DSL and IP-based communication services.

As at 31 March 2011, Telenor Sweden had 2.1 million mobile subscriptions, 533,000 fixed broadband subscriptions, and 376,000 fixed telephony subscriptions (including VoIP). As at 31 March 2011, the mobile penetration and number of inhabitants in Sweden were 127% and 9.3 million, respectively.

Network and licences

Telenor Sweden holds several spectrum licences suitable for mobile services: one in the 900 MHz band, one in the 1800 MHz band, one in the 2100 MHz band, one in the 2600 MHz band and one in the 800 MHz-band (held together with Tele2). The Swedish national regulatory authority (the NRA) decided on 13 March 2009 to prolong the licences in the 900 MHz band until 2025. The decision made refarming of the 900 MHz band possible in Sweden. Refarming of the band includes redistribution of available spectrum between operators, making licences technology neutral and introducing one new operator in the 900 MHz band (Hi3G). As a result of delays caused by a legal challenge to the NRA decision in 2009, the NRA decision was first effective from 2 February 2011. The NRA decision is still formally under the scrutiny of the European Commission with regard to State Aid rules.

On 19 February 2010, the NRA decided to prolong the 1800 MHz licences until 31 December 2027 (31 May 2017 for Swefour GSM AB). The NRA decision on 1800 MHz licences has been appealed by three of the current licence holders. Assignment of the available frequencies in the 1800 MHz band (2x35 MHz) is subject to an auction. The auction has been postponed, but will most likely take place in the second half of 2011. 2x5 MHz in the 1800 MHz band has been reserved for licence exempt usage.

The 2100 MHz licences have been prolonged and expire in 2025. The original licence conditions such as coverage and sole control of part of the infrastructure were removed and the licences were made technology neutral as of 1 April 2011. Telenor has a network sharing agreement with Hi3G for 3G networks (2100 MHz band only).

On 8 May 2008, Telenor, TeliaSonera, Tele2 and Hi3G secured Frequency Division Duplexing (FDD) licences in the 2600 MHz band for a total of SEK 2.1 billion in aggregate. The licences were awarded by the NRA through an auction. Telenor purchased 2x20 MHz FDD for a full LTE carrier for the amount of SEK 534 million.

On 4 March 2011, Telenor and Tele2 jointly acquired 2x10 MHz licences in the 800 MHz auction for the amount of SEK 769 million, to be utilised in the Net4Mobility joint venture for an LTE 800 network. SEK 300 million of the licence amount shall be used for rural mobile broadband coverage. TeliaSonera acquired 2x10 MHz licences for SEK 854 million and Hi3G 2x10 MHz licences for SEK 431 million. The difference in the amounts paid for these licences is related to a difference in licence conditions.

On 14 April 2009, Telenor and Tele2 announced an agreement to build a joint 2G and 4G network in Sweden. The agreement includes the formation of a joint venture for network construction and spectrum sharing in the 800 MHz, 900 MHz, 1800 MHz and 2600 MHz frequency bands. The roll-out of what will be Sweden’s most extensive 4G network started during 2010 and the first 4G services were launched in November 2010. Tele2’s and Telenor’s current GSM networks will be merged. The roll-out during the next two years will result in improved voice coverage for all customers.

Competition

Telenor Sweden is one of six mobile network operators in the Swedish market. TeliaSonera and Tele2 both hold a GSM licence and a joint UMTS licence. TeliaSonera holds a 2600 MHz licence and an 800 MHz licence and Tele2 holds a 2600 MHz licence and an 800 MHz licence together with Telenor. Hi3G Access holds a 2100 MHz (UMTS) licence, a 900 MHz licence, two 2600 MHz licences and an 800 MHz licence, operating under the brand “3”. SweFour, which is controlled by Tele2, holds a GSM 900 MHz licence which is partly used by Spring Mobil. Spring Mobil holds an 1800 MHz licence. Nordisk Mobiltelefon (Ice.net) held a 450 MHz licence for CDMA 2000 until March 2009, when Access Industries took over the licence and rebranded Ice.net to Net1.

Telenor Sweden is the third largest mobile operator in Sweden, with an estimated market share of 16% of subscriptions as at 31 March 2011. As at 31 March 2011, TeliaSonera had an estimated market share of 40%, Tele2 (including Spring Mobil) had an estimated market share of 31% and “3” had an estimated market share of 9%. As at 31 March 2011, Net1 was estimated to hold a market share below 1%.

Telenor Sweden is the third largest provider of fixed broadband services to the consumer market in Sweden with an estimated 19% market share as at 31 March 2011. As at 31 March 2011, TeliaSonera had an estimated market share of 37%, and ComHem and Tele2 had estimated market shares of 19% and 9%, respectively.

As at 31 March 2011, Telenor Sweden had an estimated market share in fixed telephony in the consumer market of 11% (including VolP), TeliaSonera had an estimated market share of 56%, Tele2 had an estimated market share of 14% and ComHem had an estimated market share of 11%.

Regulatory matters

Telenor Sweden has been identified by the NRA as having SMP in the market for mobile call termination. Remedies imposed by the NRA include interconnection obligations, price regulation in accordance with the LRIC model, non-discrimination, accounting separation and transparency obligations. As of July 2008, all mobile operators have applied symmetrical termination rates. Since July 2010, the regulated rate for mobile termination has been SEK 0.26 per minute. The mobile LRIC method will be revised during H1 2011, taking into account the European Commission recommendation on termination rates, which will lead to further reductions in mobile termination rates. The preliminary future glide path of these reductions is SEK 0.19 per minute from July 2011, SEK 0.11 per minute from July 2012 and SEK 0.06 per minute from 2013.

Telenor Sweden has also been identified by the NRA as having SMP in the market for fixed call termination. Remedies imposed by the NRA include interconnection obligations, price regulation, accounting separation and non-discrimination. For voice termination, Telenor is to apply a fair and reasonable price that does not exceed the cost oriented price of TeliaSonera. Since January 2010, the cost based fixed termination rate for TeliaSonera is approximately SEK 0.032 per minute. The fixed LRIC method is currently being revised. The preliminary future glide path of these reductions for fixed termination is SEK 0.0307 per minute from June 2011, SEK 0.0266 per minute from January 2012, SEK 0.0075 per minute from January 2013 and SEK 0.0009 per minute from January 2014.