Bloomberg News

Hutchison Nordic Phone Unit to Stay Independent, Ramel Says

June 17, 2011

(Updates with share price in sixth paragraph.)

June 17 (Bloomberg) -- 3 Scandinavia, Hutchison Whampoa Ltd.’s mobile-phone operations in Sweden and Denmark, will remain independent even as rivals merge their networks, its chief executive officer said.

3, which has about 10 percent of customers in each country, competes with former Nordic monopolies TeliaSonera AB, TDC A/S and Telenor ASA, as well as newer entrant Tele2 AB, all of which also have fixed-line businesses. While TeliaSonera and Telenor said this week they will merge their Danish mobile-phone networks, consolidation in the market can be avoided and 3 isn’t looking for a network-sharing deal, Peder Ramel said.

“We must have a market share of at least 20 percent,” Ramel, 55, said in an interview in Stockholm. “I have to make sure the company can stand on its own, that we continue to have positive cash flow and the owners get a return on their investment.”

Billionaire Li Ka-shing’s Hutchison, based in Hong Kong, started 3 in 2003 to offer faster third-generation services at a time when few customers had handsets that could surf the Web. 3 Group, which operates in European markets including the U.K. and Italy as well as Australia, reported its first profit in March. Ramel’s division is 40 percent owned by Investor AB, the Wallenberg family’s investment company.

‘Difficult Position’

“The Telia-Telenor network announcement puts 3 in a difficult position since they don’t have scale compared to the others,” said John Strand, owner of Copenhagen-based telecommunications adviser Strand Consult.

Hutchison fell 0.9 percent to HK$83.75 at 2:53 p.m. in Hong Kong trading. The shares have jumped 75 percent in the past year, valuing the company at HK$356 billion ($46 billion).

3, with about 1.1 million customers in Sweden and 800,000 in Denmark, targets higher-spending customers who use mobile data and sign up for add-on services such as music streaming and recorded books. The company is now rolling out faster fourth- generation services.

“We’re building 4G and we will launch it after summer when we believe we have good enough coverage,” Ramel said. “Our competitors have spent an awful lot of money on the marketing of 4G and for the employees in those companies it’s been very interesting but there hasn’t been that much of a reaction from consumers.”

Customer Spending

Last year, Onfone ApS, a virtual mobile-phone operator, started a price war in Denmark with flat-rate packages with limits on usage. Ramel reacted by lowering prices on 3’s side brand Oister. TDC, Denmark’s biggest phone company, bought Onfone in May.

Onfone’s most popular package now costs 149 kroner ($28) a month for five hours of talk, free texting and 500 megabytes of data while Oister, which charges 129 kroner for a 5-hour package with 5 gigabytes of data, will raise the price to match Onfone’s at the end of the month.

In its 2010 report, the most recently available, 3 said its average revenue per user for Sweden and Denmark declined 5 percent to 329 kronor ($51). In the first quarter, Telenor’s Danish ARPU fell 4 percent to 189 Norwegian kroner ($34), while TDC’s blended ARPU for mobile voice contracts in Denmark dropped 2.4 percent to 161 kroner ($31). TeliaSonera, Telenor and TDC cited increased price competition and lower interconnection fees for the declines.

In Sweden, 3 aims to win more subscriptions from competitions with its service where a family’s fixed-line number can be assigned or forwarded to mobile devices, Ramel said.

“In Sweden 90 percent of households still had a fixed line connection until quite recently,” he said. “I think we will go down to 50 percent in maybe three years.”

--Editors: Kenneth Wong, Heather Harris.

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net


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