Tele2 leaves Norwegian market following spectrum auction

At the beginning of last week, Tele2 announced that it was selling its Norwegian operations to rival operator TeliaSonera for $750 million (SEK 5.1 billion). The company said the sale was “prompted by changes to the structure of the Norwegian market as a result of the license auction in December 2013”.

The competitive constraints the company faced “without resources on the multiband frequency required us to evaluate different options for our Norwegian businesses,” added president and CEO Mats Granryd.

In that auction, the Norwegian regulator NPT used the combinatorial first price sealed bid format. At its conclusion, Tele2 was left with only 2 x 5 MHz in the 900 MHz band and a total of 45 MHz in the 2.1 GHz band, while a 2 x 15 MHz block of spectrum in the 1800 MHz was left unsold. It also saw the entry of a new player, Telco Data, which is unlikely to launch any services for a while yet.

In the first half of this year, Tele2 sought to make deals with the operators who did better in the auction. However, without more spectrum, it seems the company felt it had little choice but to leave the market, and Norway’s mobile industry has now become a duopoly, at least for the time being. This could well lead to inferior services and higher prices.

Would other auction designs, such as SMRA or CCA, have given Tele2 a better chance? A format with multiple rounds would have allowed “price discovery”, perhaps making it easier for the company to take on Telco Data.

Tellingly, the NPT recently said that when the unsold 1800 MHz spectrum is returned to the market at the beginning of next year, a multiround ascending auction format will be used.

The perfect auction format has yet to be designed but it is always worth remembering that for mobile operators, these procedures can be a matter of life and death.