Vodafone Group Plc is selling its loss-making operation in Sweden to Telenor ASA for 1.035bn euros ($1.25m), figuring that the net cash proceeds of 970m euros ($1.17bn) is a safer bet than battling on in a highly competitive and tightly regulated market.
Corporate customers in the area tend to look for carriers with a pan-Nordic network, that Telenor can provide, rather than Vodafone’s isolated Swedish operation. It is currently the third-largest operator in Sweden with 1.5 million customers, giving it a 15.5% market share.
As the country has four wireless carriers, one MVNO and 20 service providers, there is no shortage of competition. And with 104% penetration for mobile phones, growth opportunities are limited.
On Vodafone’s own forecasts, the Swedish operation will be cash flow negative until 2008. Chief Executive Arun Sarin said that while it had a good business in Sweden, the particular industry structure and regulatory environment meant that it made more sense for a pan-Nordic player like Telenor to own the company.
The sale, which is subject to EU regulatory approval, is expected to close by the end of the 2005. As a result of the deal, Vodafone will record an impairment charge of approximately 500m euros ($604.5m) in its interim results for the six months to September 30.
Oslo, Norway-based Telenor said Vodafone was the second largest player in the Swedish business market, with a 30% market share among corporate customers. For the financial year to 31 March 31, Vodafone Sweden posted revenue of SEK 6.7bn ($850.3m).
The deal would increase Telenor’s Scandinavian mobile customer base by 37% to 5.6 million subscribers.