Swedish Operators Join Forces in LTE Race

Sweden is set to be blanketed with next-generation mobile broadband after two competing operators announced today that they will join forces to build a national Long-Term Evolution (LTE) network.

Tele2 AB (Nasdaq: TLTO) and Telenor Group (Nasdaq: TELN)'s Swedish subsidiaries -- the second and third operators in the country, respectively -- revealed today how they will share spectrum and jointly roll out a national LTE network through a new joint venture, called Net4 Mobility. The news marks the first network sharing deal for the proto-4G mobile broadband technology. (See Operators Face LTE Deployment Dilemma.)

In the race to be first with commercial LTE services in the country, the operators in this new network sharing joint venture will go head-to-head with Sweden's national operator, Telia Company , which plans to launch LTE services in Stockholm, and in Oslo, Norway, next year. (See TeliaSonera: We'll Do 4G in 2010.)

So who will be first? "It's going to be a fight between us," Telenor Sweden CEO Lars-Åke Norling tells Unstrung. "Now the real race begins."

But the deal between Tele2 and Telenor Sweden goes beyond LTE and includes plans to revamp and share GSM networks as well. The operators plan to build better GSM coverage as they deploy the new LTE cell sites and eventually shut down their existing, separate GSM networks, in order to use their spectrum more efficiently, improve voice network coverage, and save on operating costs. Through the new shared GSM network, the operators plan to extend their GSM reach by 30 to 50 percent.

"We'll be closing down our existing 2G network," Niclas Palmstierna, Tele2 Sweden CEO, tells Unstrung. "As we roll out 4G, we'll continuously add 2G modules. That means we can make significant savings."

The switchover to the new, shared GSM network won't happen overnight. Palmstierna estimates that the operators will be able to shut down their GSM networks around 2013 when the LTE network is expected to be completed and 99 percent of the population is covered.

In addition, the operators will pool together and share their 900 MHz and 2.6 GHz spectrum in the new joint venture. The 900 MHz spectrum is used for GSM services, but Tele2 and Telenor Sweden plan to use this frequency for LTE as well. Each operator also has 2x20 MHz of 2.6 GHz spectrum, which was won in an auction in May 2008 and which will be used for LTE services only. (See Swedish 4G, Telenor Bags 4G Spectrum, Europe Waits for 4G Spectrum, and Europe Faces 4G Spectrum Delays.)

Swedish operators are no strangers to network sharing arrangements. Tele2 jointly built its 3G network with TeliaSonera, while Telenor Sweden has a similar 3G network sharing partnership with Hi3G Access AB (a.k.a. 3). Those existing 3G relationships ruled out the inclusion of 3G networks in the new venture announced today between Tele2 and Telenor Sweden.

The LTE network rollout will begin this year in major Swedish cities, and commercial services are expected to launch by the end of 2010, or when devices are available. The operators are looking for USB modems for starters as they plan to use the new network initially just for data services. The operators claim data rates will be up to 150 Mbit/s in urban areas and up to 80 Mbit/s in rural regions.

The operators did not disclose any financial details about the new venture or about how much the LTE network will cost to deploy. But according to Tele2's Palmstierna, it will cost less than SEK 4.5 billion (US$551 million), which is how much it cost to deploy the 3G network that Tele2 jointly built with TeliaSonera.

The operators also did not reveal the network equipment suppliers but said an announcement would be made after this summer about that. Palmstierna says that the major vendors for the operators' requirements, in his view, are Ericsson AB (Nasdaq: ERIC), Nokia Networks , Huawei Technologies Co. Ltd. , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). He stressed, however, that that group of vendors is not a shortlist, adding that he didn't want to "close the door" on any other suppliers.

Now that TeliaSonera, Tele 2, and Telenor Sweden have firmed up their plans for the 2.6 GHz spectrum they won in an auction in the country last May, there are two other license holders that have not revealed plans -- namely Hi3G and Intel Capital . Hi3G has 2x10 MHz in the 2.6GHz frequency band while Intel has 50 MHz in the 2.6 GHz band that is suitable for WiMax.

— Michelle Donegan, European Editor, Unstrung