Finnish 3G License for Sale
Those holdings amount to a GSM 1800 network in Finland's major towns, 250,000 2G customers, and a 3G license.
Telia might have trouble satisfying the EC requirement, though. With little spare cash in the market for acquisitions, and the merger of the Swedish and Finnish incumbents creating a Nordic and Baltic mobile powerhouse, the prospect of taking on a loss-making cellular operation in Finland might not tempt too many prospectors.
Tommy Ljunggren, cofounder of Swedish wireless consultancy Northstream, believes there will not be too many candidates. "Hutchison 3G has so far shown little interest in 2G, so that rules them out, and Telenor ASA has not been aggressive in the Finnish market," says Ljunggren.
But while Ljunggren discounts Telenor, Unstrung believes the Norwegian carrier may seek ways to gain market share outside its home turf now that its nearest neighbors have all but tied the knot. Telenor was previously involved in negotiations for a three-way merger with Telia and Sonera, but those talks faltered early in the negotiations. In addition, Telenor is in the process of trying to help Song Networks Holding AB (Nasdaq: SONW), which has telecom operations in both Sweden and Finland, restructure its debt -- and take a majority stake while they do so. The Norwegian operator also took a majority stake in Ukrainian mobile operator Kyivstar GSM this week, thereby boosting its business in the Baltic region (see Telenor Controls Kyivstar GSM).
The Baltics are a key area for Telia/Sonera [ed. note: Sonelia? Tenera?]. In addition to key mobile operations in Sweden, Finland, Denmark, and Norway, the duo jointly hold majority market shares in Estonia, Latvia, and Lithuania, each an expanding mobile market.
"Telia has concentrated its efforts in the Nordics and Baltics," and this merger will have a huge impact in those areas, says Ljunggren. But while Telia has largely kept its focus close to home, Sonera has had a roving eye, especially during the European rush for 3G licenses. "Clearly their [overseas mobile] strategies have not been the same," says Ljunggren. Sonera has a 42.8 percent stake in Group 3G, which holds one of six expensive 3G licenses in Germany. Its partner there is Telefonica Moviles, which holds the balance. In Spain, Sonera is one of many shareholders in Xfera, in which it holds a 14.25 percent stake. In Italy, the Finnish operator has a 12.55 percent share in IPSE 2000.
These 3G licenses have become a financial burden for Sonera. In October 2001 the company announced: "While Sonera continues to believe that investments in UMTS consortia could bring important benefits to Sonera in the long term, Sonera has taken a number of steps to limit future financial exposure to these investments. Sonera has decided not to invest any additional funds in Group 3G, Sonera's German UMTS consortium, and to limit investments in IPSE 2000, Sonera's Italian UMTS consortium, and Xfera, Sonera's Spanish UMTS consortium, to the minimum amount allowable under existing commitments." That minimum amounts to about €500 million ($494 million).
So what does Telia think of Sonera's 3G holdings in Germany, Spain, and Italy? "It is too early to comment on that," says Telia's head of press relations Marianne Laurel. "The next step is that the offer goes to Sonera's shareholders on 25 July. We are pleased that the EC has approved the deal." Telia is offering 1.544 shares per Sonera share.
And what of Telia's 3G license in Finland? "We don't have a 3G license in Finland, do we?" asks Laurel. As it definitely does have a 3G license, the response suggests that the Swedish telco isn't expecting big things from its sale.
As well as divesting itself of its Finnish mobile business, Telia has also to rid itself of its wireless LAN (WLAN) business in Finland -- all 40 access points. "That struck me as strange. I can't understand why the EC even bothered. It is such a marginal business," says Northstream's Ljunggren. "That is definitely a business that is in the red. WLAN has got far more attention" than it is due. Ljunggren thinks the whole public access WLAN idea has been overhyped. "That market will be small for a very long time. It is something that has a very marginal effect. People say it will have an impact on 3G businesses, but it won't."
So was Telia surprised that the EC has asked it to sell the WLAN business as a condition of the merger? "I don't know if we were surprised," says Laurel. Righty ho.
— Ray Le Maistre, European Editor, Unstrung