Telenor and TeliaSonera plan to merge their Danish operations in what analysts say is a "credible strategic solution" to TDC's domination of the market, however, the move faces close regulatory scrutiny due to a potential marginalisation of Three Denmark (3).
The Nordic operators today revealed an agreement to form a 50:50 joint venture in Denmark by combining their current mobile operations in the market. The combined operator will have a subscriber base of around 3.5 million, giving it a market share of around 40 per cent of Danish users, and generate revenues of DKK9 billion (€1.2 billion/$1.4 billion), the companies stated.
While Telenor and TeliaSonera have shared network infrastructure in Denmark since 2012, the companies state that ongoing pressure on profitability in the market means an "independent and full-function joint venture is the strategically preferred route to capture synergies and create value."
Jefferies International analysts agree, stating that Telenor and TeliaSonera have "long grappled with their sub-scale positions in the Danish market" and their lack of ability "to break TDC's dominance", in an industry note emailed to FierceWireless:Europe.
Telenor and TeliaSonera expect the synergies created by the merger to deliver efficiency gains of at least DKK800 million from 2019 onwards. Subscribers can expect to benefit from the larger distribution network the merger will create, and improved connectivity and performance. Investment in new services will also be lifted, and the pair also plan to combine their fixed-line assets to improve broadband provision.
Kjell Morten Johnsen, EVP and head of Europe at Telenor, said intense competition in Denmark makes "consolidation inevitable." His counterpart at TeliaSonera, Robert Andersson, added that the merger is a "necessary and natural move" that will benefit the operators' customers and "the Danish society as a whole."
EC competition authorities may not agree, Jefferies International noted. "This deal falls within the remit of a regulatory review by the EC. We think consolidation from 4 to 3 MNOs [mobile network operators] might be allowed here as well (as in Germany, Austria, and Ireland before) in particular because neither TLSN [TeliaSonera] nor TEL [Telenor] have a credible stand-alone business case due to TDC's overwhelming position".
The investment bank predicts regulators will be "keen to strengthen 3" to fend off potential polarisation in Denmark as a result of the merger, which it notes will leave TeliaSonera/Telenor with a postpaid subscriber share of around 51 per cent compared to 46 per cent for TDC, and 13 per cent for 3.
Meanwhile, a separate deal by TeliaSonera to acquire Tele2 Norway could be blocked by Norwegian regulators amid concerns the deal will impact competition by cutting the number of network operators in the country from three to two, Reuters reported.
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