Swedes set for early 3G phone coverage

Telia's bid failed despite its strong position in the market

Sweden has become the latest European country to award licences for establishing third-generation mobile phone networks.

But the Scandinavian country has departed from the script followed by most of Europe by charging relatively little for the licences in the hope of encouraging faster development of new services and lower customer charges.

"Within three years, 99.98% of Sweden will have ... [3G] coverage," Industry Minister Mona Sahlin said.

Elsewhere in Europe, including in the UK and Germany, there have been fears that provision of 3G services will be held up because of the very high prices operators have been forced to pay to obtain licences.

Many have built up huge debts and will find it difficult to find the necessary funds for infrastructure investment as quickly as they might like.

The Bank of England and the UK's financial regulator have been among those warning banks recently of overexposure to telecoms firms while the heavy costs incurred by telecoms firms are expected to result in relatively high charges for 3G users.

Telia turned away

In another unexpected development in Sweden, the bid from Telia - the former national telecoms monopoly - was rejected.

The four successful bidders were:

• Europolitan, part of the UK's Vodafone
• Tele2, a joint venture led by the mobile arm of Sweden's Netcom
• a consortium including France Telecom's Orange and cable provider NTL
• and Hi3G Access, a venture of Hong Kong-based Hutchison Whampoa and Investor, the holding company of Sweden's prominent Wallenberg family.

The licences were awarded after examination of criteria including bidders' financial strength, technical feasibility, roll-out speed and commitment to geographical coverage. Ten groups had taken part in the contest.

The 3G licence holders will be charged a nominal fee of 100,000 Swedish krona ($10,373) each, plus 0.15% of annual turnover.

This compared with auctions in Germany and the UK that had raised an average of 8.4bn euros ($7.7bn) and £4.5bn ($7.1bn) per licence.

Orange chief operating officer Michael Latimer said his company's 3G network would cover the entire Swedish population by 2003.

"With our roll-out plan, we believe that Swedes will be among the first in Europe to be able to take advantage of the new technology," he said.

Base station shortcomings

Telia president Marianne Nivert said the authorities' decision to refuse it a licence was "completely inexplicable" and the company would appeal it.

But Post & Telecom Authority director general Nils Gunnar Billinger said the shortcomings of the firm's bid had been "considerable", particularly in terms of geographical coverage.

He said Telia would have needed to increase three-fold the number of base stations it had planned to build.

Analysts were expecting a sharp drop in Telia's share price when trading resumed on Monday morning.

The issue has already lost 30% since flotation in June, closing at 59.5 krona on Friday.

Other unsuccessful bidders for the Swedish licences included international heavyweights Deutsche Telekom and Telefonica of Spain.