Giant ISP Born in Scandinavia

The merger of Swedish telcos Telia and Norway’s Telenor this past week created a northern
European telecom that controls the main Scandinavian Internet service
provider market and has the makings of a monopoly.

Both telcos are market leaders of Net traffic in each country. Telia in
Sweden has about 37 percent of the dial-up market and Norway’s Telenor, 70
percent. But Telia is also operating in Norway with a market share of 12
percent, making its combined share in Norway to 82 percent. As Arne
Cartridge at Telenors Net company Nextel says, “its possible that this share
is too big for the EU Commission to take.”

The companies offer connections via dial-up modems, ISDN and dedicated
services. They both host Web servers for customer Web sites as well, with a
combined market share of about 20 percent. And together with Norwegian
media group Schibsted, they are part owners of the Net portal and content
company Scandinavia Online (SOL), with operations in both Norway and Sweden.

They also hold the market on the high-speed networks in the region. The
merged company totally owns the asymmetrical digital subscriber lines
(ADSL) in Norway and Sweden, and Telenor has already started offering ADSL
service.

Telia is the leading cable network operator in Sweden, and later this year
will start providing cable modem service.

Both Telia and Telenor are state-owned, and the new company will be
registered in Sweden with headquarters in Stockholm.

One problem with these dominating enterprises is lack of competition.
Development is held back and price levels remain high. The question is, is
this merger is benefiting the customers in Sweden and Norway?

“We will create a Nordic flagship in the telecommunications and IT
industry. We are world-class contenders in important areas such as mobile,
Internet and satellite services,” said Tormod Hemansen, Telenor’s CEO, and
CEO of the new firm, whose name has not yet been decided.

The new company will have annual revenues of c. SEK 79 billion ($10
billion) with $200 million based on Internet business.

The merger is dependent on the approval of the national assemblies of the
two countries and by the European Commission.