7 August 2002 Mobile operator Orange has asked the Swedish authorities for an unprecedented three-year delay in building a nationwide third-generation (3G) wireless network in Sweden.
Its request is the latest sign that carriers are struggling to build 3G networks in Europe and that many may have to write off large chunks of the massive investments they made in 3G licences. In Europe, mobile operators spent around €100 billion to buy 3G licences in a series of auctions and ‘beauty contests’.
Orange won a 3G licence in Sweden largely on the back of the aggressive network rollout commitments in its application. Under one such undertaking, the France Telecom-owned carrier pledged to roll out a 3G network covering most of Sweden by the end of 2003.
A delay in receiving planning permission to build 3G antennae is one reason why Orange has asked for an extension until 2006. If the Swedish authorities reject Orange’s request and the operator goes on to miss the 2003 deadline, the operator faces a large fine and the possible termination of its licence.
Like other Scandinavian countries, Sweden did not run a 3G licence auction. Instead, it gave the licences away to telecoms companies almost free of charge, but imposed strict conditions to ensure a fast roll out of 3G services. Winning applicants – Orange, Vodafone, Tele2 of Norway and Hi3G, a unit of Hutchison Whampoa – promised to provide nationwide coverage in Sweden, including sparsely populated areas of the country.
Controversially, Telia, Sweden’s largest telecoms company, did not receive a 3G licence. Telia later argued in court that the Swedish regulator unfairly awarded licences to other operators because it was taken in by their unrealistic claims about a swift roll out of 3G technology. Telia will offer 3G services in its home country through an agreement with Tele2.
Orange is not the only telecoms operator to experience difficulties in building 3G networks in Europe. Last month, Sonera of Finland and Telefonica of Spain said they would write off a joint €8.4 billion investment to develop a 3G network in Germany. And in the last few days it has emerged that Tele2 asked the Norwegian government to push back its deadline for building a 3G network in its home country.
If Orange’s bid for an extension is successful, it could trigger a wave of similar requests from other mobile operators across Europe.