Sunday, November 20, 2005

Ovum: Vodafone exits ultra-competitive Swedish market

There has been a lot of M&A action in the mobile market, which is keeping Ovum busy. Carrie Pawsey posts her thoughts on Telenor's decision to buy Vodafone Sweden for just over euro1 billion. Vodafone Sweden is the third-largest operator in Sweden, with just over 1.5 million subscribers and a 16% market share.

As Pawsey writes the "deal says more about Vodafone than it does about Telenor. For Telenor, the benefits are relatively straightforward; it can gain synergies from its Norwegian operation and grow its business in Sweden to establish itself as a market leader in the Nordic region. Telenor currently has just under 100,000 subscribers in Sweden, through an MVNO arrangement with Tele2, which are mainly in the business segment. The Vodafone deal will allow it scope to grow."

Pawsey posits that for Vodafone the:

deal highlights the difficulties it has experienced in Sweden. Fierce price competition has broken out amongst the four network operators following the launch of Hutchison 3G in 2003, and on top of that there has been an explosion of more than 20 MVNOs and service providers. While Vodafone does have the highest ARPU in Sweden, it has seen this decline from euro41 to euro34 in just over 18 months, with no sign of it stabilising. Vodafone has also faced difficulties in rolling out its Swedish 3G network, with the regulator refusing to relax licence conditions. Vodafone is not the first operator to exit the Swedish market, Orange also decided not to launch 3G services and returned its licence in 2003.
Pawsey observes that "both Telenor and Vodafone have been pursuing investments in markets with higher growth potential than the saturated markets of Western Europe," and wonders if "Vodafone has one eye on obtaining a foot in the door with Telenor's emerging market operators as well?"