Sweden's operators will share the risk for 3G

(Telephony) Sweden's largest telecommunications operator Telia AB averted potential disaster in the financial market by crafting a UMTS network structure deal with rival NetCom AB.

Telia unexpectedly failed to receive a third-generation license in its own market in December from the Swedish National Post and Telecommunications Agency. Telia is appealing the decision.

"When we spoke before the holidays, I promised there would be 3G in Sweden," Marianne Nivert, Telia's CEO and president, said during a conference call. "It's an attractive deal from an investment point of view, and it gives us full access to a UMTS network."

The two carriers have signed an agreement that creates a 50/50 joint venture that will build and maintain a UMTS network under a 3G license NetCom secured. Both companies will purchase airtime from the joint venture and continue to compete with each other for customers.

"Since the government announced the winners of UMTS licenses, we have been looking at various ways to cooperate with other operators to build infrastructure," said Lars-Johan Jarnheimer, president and CEO of NetCom. "We want to create a solution that will quickly fill the UMTS network with traffic to get revenues as quickly as possible."

The move may indicate a positive step in the European 3G market. Investor sentiment toward the market is negative since operators must spend large amounts building out new networks without a proven business case for wireless data services. Telia's and Netcom's deal lowers the risks associated with the next generation.

"This will have a dramatic effect on the investment level," said Jarnheimer.

Terms of the deal were not disclosed, and both companies believe they will receive the necessary regulatory approvals for the joint venture.

The two companies also intend to investigate the possibilities of establishing a similar joint venture in Norway and other areas of Europe. In the meantime, Telia said it would continue with its appeal for the lost 3G license and that the joint venture would go forward regardless of the outcome.