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General

Tele2 Netherlands in need of vision and stability

Thursday 20 November 2014 | 13:50 CET | Market Commentary
Tele2 Netherlands is going through some interesting times, with the pending activation of its LTE network and continued changeover in its management. At the same time its position in the market is in question, as KPN and Ziggo consolidate their dominance. We look at what could be expected from Tele2 in the coming months. 

LTE

To start with, its own LTE network. The company has kept quiet on the launch date since it acquired spectrum late in 2012, but the roll-out progress suggests the launch will take place in early 2015. One of its executives said as much already at a recent conference. Tele2 wants to launch only once it has sufficient national coverage and quality. The conditions of its spectrum licence are putting pressure on the company, but if the launch is rushed it may end up being only a disappointment. Opting for a 'soft launch' would also be disappointing, as Tele2 hopes to make a splash with the new network.

Nevertheless, the company is no newcomer on the market. It's been a MVNO for years (on the T-Mobile network) and has been steadily growing its market share since the end of 2011. By the end of Q3, it had 791,000 mobile customers, and at the current rate, it should reach a million within around two years. However, its management may want things to go faster. With its own network, it will have room to lower prices and accelerate growth.

Questions

The company still faces a number of questions:

  • What is Tele2's future in the Netherlands? Will the group allow cash flow to be sacrificed in order to grow in the Netherlands? Will the proceeds from selling Tele2 Norway be re-invested in the Netherlands, as was earlier suggested?Will this make Tele2 NL a showcase for the Tele2 Group and the mobile market in general? It's not the only company trying to launch a new mobile network in Europe (Ice in Norway, Net 1 in Sweden and Denmark, Swan in Slovakia, BT in the UK, Digi in Hungary). Tele2 also targets EBITDA breakeven for all its MNOs within three years of launch.
  • Will Tele2 realise its stated goal of unbundling on the Reggefiber/KPN FTTH network? Or will the focus be entirely on LTE?
  • Is the Dutch unit (which received much political support for its arrival as the fourth MNO) a takeover target? Is a merger with mobile-only T-Mobile Netherlands the next obvious step?
  • What exactly is the  mobile strategy? With or without T-Mobile, Tele2 is likely to follow the 'uncarrier' strategy developed by T-Mobile US. In Sweden it's already offering month-to-month contracts, with handset fees separated from the subscription tariffs.
  • In September 2013, Tele2 issued (over-) ambitious targets. It aimed for minimum market shares (within an unspecified period) of 20 percent in mobile, 15 percent in consumer fixed and 10 percent in the business segment.

Conclusion

The ongoing management issues at the operator are not helping. Both at the group level and at the Netherlands, there has been a steady turnover in management. With the company facing so many fundamental questions, it's clearly difficult to get everyone's thinking aligned. It would be good if Tele2 could come up with a clear strategic plan. To ensure stability, hopefully the management in Stockholm has enough of a grip on the team in Amsterdam and a good man in place with CEO Jeff Dodds (previously at Virgin Media).



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