Tele2 Eesti, the smallest of Estonia's three mobile network operators, has doubled its mobile broadband capacity after acquiring additional 2.1GHz spectrum. Now armed with the largest spectrum portfolio relative to its peers, Tele2 is embarking on a plan to improve cost efficiencies that will help it compete more effectively in this price-focused, saturated and mature market. While the transaction has been approved by the requisite technical authorities, BMI expects Eesti Mobiiltelefons (EMT) and Elisa Eesti to object to the decision.
The additional spectrum has not been properly utilised since it was originally allocated to PGH Raadiov rk O and BMI welcomes the fact that it has been reassigned to a commercial organisation better placed to exploit this scarce resource. As Tele2 Eesti's mobile broadband network is less developed than those of its rivals, we acknowledge the Estonian Technical Surveillance Authority's decision to transfer the frequencies to the smallest player. However, as the operator already owns spectrum in the 450MHz, 900MHz, 1800MHz, 2.1GHz, 2.3GHz, 2.6GHz and 3.5GHz bands, in addition to the 800MHz 'digital dividend' frequencies it acquired at auction in January 2014, we would not be surprised if its rivals voiced their concern about Tele2's dominance in the spectrum market.
|More Bandwidth Seen As Tele2's Lifeline|
|Market Shares By Operator, Q110-Q413 (%)|
Tele2 Estonia served approximately 503,000 subscribers at the end of 2013, accounting for 25.7% of a total mobile user base of 1.954mn, according to BMI's Mobile Operator Database. It lags behind Elisa Eesti by a small margin (4.3 percentage points), based on subscription figures reported by Elisa's Finnish parent. [Elisa Eesti itself reports a rather larger user base, which likely includes customers controlled by service providers or MVNOs.] EMT, meanwhile, enjoys a much larger market share, in excess of 44%. Tele2's market share is trending downwards and additional bandwidth is one tool it can employ to halt or reverse that trend.
Price competition, regulator-enforced cuts to mobile termination rates and the high cost of spectrum acquisition and usage have weighed on Tele2's ability to invest in expanding its network and services to match those of its peers. Thus, the additional frequencies - which are technology-neutral - will enable it to offer higher quality mobile broadband services over existing infrastructure geared to offering 3G services. The derived cost savings will help Tele2 compete more effectively on pricing and invest more in developing its 4G network and services. Tele2 Eesti saw net sales fall by 26.5% from SEK825mn in 2012 to SEK606mn in 2013, mainly due to lower interconnection revenues and lower equipment sales.
BMI expects Elisa to appeal the authority's decision although, as it is benefiting from considerable interest in mobile number portability and is therefore growing strongly in this saturated market, its pleas may rejected. EMT may also appeal the move, but its market dominance would likely nullify any objections it raises.