Analyst Commentary

• The winners of the Danish digital dividend auction will use the spectrum to boost their LTE coverage as the government hopes to meet its target of 100% mobile broadband coverage by 2020.
• Fourth-placed mobile player 3 Denmark has also announced plans to launch LTE services in the country in September 2012, using TDD/FDD dual-mode network technology.

Today we focus on five developments:

• TDC and Telia/Telenor Venture Win Danish 800-MHz Licences: The Danish regulator has announced it has sold 60 MHz of spectrum in the 800-MHz digital dividend frequencies, with TDC and TT-Netvaerket (TTN), the joint venture (JV) of Telia and Telenor, both grabbing licences. Incumbent TDC won 2x20-MHz worth of spectrum, while TTN won 2x10 MHz. The regulator, NITA, gained 739.3 million Danish kroner (USD124.3 million) in total for the five blocks of spectrum (comprising four 2x5-MHz blocks and one 2x10-MHz block). The licences are subject to mobile broadband coverage requirements, which stipulate that the operators provide 98% outdoor coverage by 2015 of 207 postcodes across the country, split into three regions (see Denmark: 28 March 2012: Danish Digital Dividend Auction Scheduled for May 2012). The 22-year licences have been sold without usage restrictions and the frequencies will be available from the start of 2013.

• German Operators Achieve More 800-MHz Obligations: German regulator BNA has confirmed that the three 800-MHz operators have hit their obligations in Saxony-Anhalt and Thüringen. Deutsche Telekom, O2 Germany and Vodafone Germany have now covered all the communities between priority levels 1 through 4 and may now use the frequencies freely. The BNA also said that at the current rate of progress, Brandenburg and Mecklenburg-Vorpommern would soon see restrictions lifted there too (see Germany: 20 September 2011: German Operators Hit 800-MHz Obligations).

• Sweden Confirms Drop in Mobile Termination Rates (MTRs): The Swedish regulator has confirmed it will cut MTRs in the country by 28% following pressure from the European Commission (see Europe - Sweden: 7 June 2012: Analyst Commentary). The regulator, PTS, has confirmed the rates will fall to 0.15 Swedish kronor (USD0.02) per minute from 1 July 2012 from the current SEK0.21 per minute for network operators TeliaSonera, Tele2, Telenor and 3 Sweden, along with MVNOs Lycamobile, TDC, Net1 and Alltele's Ventelo. The European parliament recently approved the latest raft of regulation for mobile roaming rates, meaning the first round of cuts will come into effect on 1 July 2012.

• Netia Looks to Low-End Broadband: Netia has begun increasing its focus on subscription growth ahead of revenue growth with a new 1-Mbps, PLN29.99 broadband tariff. The tariff is around 20% cheaper than the corresponding offer from incumbent operator Orange Poland. Netia will also use the lower-priced DSL service as an opportunity to cross-sell its TV service, which it is beginning to open up to Orange customers. Focusing on low-end broadband customers will boost net additions at the expense of average revenue per user (ARPU) and margins, but will grant Netia additional scale while also smoothing the process of up-selling higher-speed packages.

• América Móvil Rises KPN Stake to 23.4%: América Móvil has once again raised its stake in KPN, this time from 20.9% to 23.4% as the Mexican giant closes in on its target to gain up to 28% of the Dutch incumbent. América Móvil has launched an unsolicited bid to gain 27.7% of KPN, an offer that expires later today (27 June; see Europe - Netherlands: 22 June 2012: Analyst Commentary).

Our Take

• While the Danish licences have been sold as technology-neutral, it is widely accepted that the operators will use the spectrum for LTE services since TDC, Telia and Telenor have already launched services in the country. TDC said the extra spectrum would allow it to bring mobile broadband services to all areas of Denmark, both urban and rural, adding that the coverage requirement will safeguard stronger coverage in areas currently experiencing patchy reception. The incumbent paid a relatively high price for its licences, but gained 2x20-MHz worth of spectrum—the highest amount that any single bidder can buy, thus giving it a significant advantage over its rivals. TDC launched its LTE network in the country in October 2011 after signing a rollout deal with Ericsson, which includes the full scope of managed services (see Denmark: 8 November 2010: TDC Taps Ericsson for LTE Managed Services Deal). The Danish government has also revealed plans to auction further spare spectrum in the 915-921-MHz band and hopes to help meet its objective of providing broadband access offering download speeds of at least 100 Mbps to the entire country by 2020.

• Telia Denmark said securing the new frequencies will allow it to continue rolling out its LTE network quickly, particularly into more sparsely populated areas, following its plans last year to expand coverage in the country to an additional 69 cities, taking its total network coverage to 73 cities in the country and covering over half of the population (see Denmark: 11 October 2011: TeliaSonera Extends LTE Network to Cover Half of Danish Population). The Danish competition watchdog gave its approval to the network-sharing deal between Telia and Telenor early in 2012 as both operators look to cut costs and gain a competitive edge over TDC. The agreement covers all of the operators' 2G, 3G and 4G mobile infrastructure, and will cover antennae, towers and transmission equipment, but not the two companies' core networks, enabling the firms to continue to offer different services to consumers. Meanwhile, fourth-placed mobile player 3 Denmark announced this week that it plans to launch LTE services in the country in September 2012. The Hutchison Whampoa-owned operator has signed a deal with ZTE to build the first LTE TDD (Time Division Duplex)/FDD (Frequency Division Duplex) dual-mode networks in Denmark and Sweden, which will be among the first in the world (see Denmark: 29 March 2011: Hi3G Taps ZTE for World's First LTE TDD/FDD Dual-Mode Network).