TeliaSonera v. Tele2

10:05 AM Mobile data growth and aggressive pricing round out a tale of two Swedes

Michelle Donegan

April 19, 2011

2 Min Read
TeliaSonera v. Tele2

10:05 AM -- Rival Swedish operators Telia Company and Tele2 AB (Nasdaq: TLTO) both published first-quarter reports on Tuesday and the results reveal two strikingly different stories about mobile services in their home market. (See TeliaSonera Reports Q1, Tele2 Reports Q1 and Euronews: April 19.)

While it would be overstating it to say that the first quarter was the best of times for Tele2 and the worst of times for TeliaSonera, there is something of "A Tale of Two Swedes" going on here. [Ed note: Apologies to Mr. Dickens.]

Looking at the mobile revenue figures from Sweden, challenger Tele2 grew mobile net sales 17 percent in the first quarter compared with last year and noted that the underlying service revenue growth was about 7 percent. Meanwhile, incumbent TeliaSonera recorded mobile net sales growth of just 5.3 percent compared with the last year.

The operators cite similar drivers for their revenue growth, but Tele2 is raking in more.

Tele2, which had 3.6 million mobile customers in Sweden at the end of March, attributes the first-quarter growth in the country to good uptake in contract customers, smartphones and increased data usage.

TeliaSonera said the mobile revenue growth is entirely explained by growth in mobile data. Its voice revenues were flat compared to last year while equipment sales were lower compared to previous quarters.

Tele2's aggressive growth comes at a price, of course. In the first quarter the operator's EBITDA margin shrank to 30 percent from 35 percent last year. That decrease is due to the higher costs of customer acquisition as well as "customer operation costs" in addition to the expense of rolling out the its Long Term Evolution (LTE) network, which it is deploying with Telenor Group (Nasdaq: TELN) Sweden through their Net4Mobility HB joint venture. (See Swedish Operators Join Forces in LTE Race.)

Tele2 is a price challenger and it is the first to admit that. "Price leadership, a central pillar of offering the Best Deal, requires us to be cost leaders," said Tele2 President and CEO Mats Granryd in a statement.

The operator has applied the same low-cost strategy to its LTE services as well. (See LTE Showdown in Sweden and Swedish LTE Challengers Wield Unlimited Offers .)

Sweden is one of the first markets to have several competitive LTE service offers. And with a challenger such as Tele2 there, the already contested 4G market is bound to get even more interesting.

— Michelle Donegan, European Editor, Light Reading Mobile

About the Author(s)

Michelle Donegan

Michelle Donegan is an independent technology writer who has covered the communications industry for the last 20 years on both sides of the Pond. Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications including Communications Week International, Total Telecom and, most recently, Light Reading.  

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