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    HomeInsightsOrange leaves Danish market to TeliaSonera

    Orange leaves Danish market to TeliaSonera

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    TeliaSonera has completed its acquisition of Orange Denmark, beginning consolidation in a crowded market. Orange Denmark has 650,00 customers, and has cost TeliaSonera EUR600 million less net debt.

    TeliaSonera said the acquisition would generate SEK490 million worth of synergies, mainly related to closing down one of the two networks the operator now owns. SIM cards and network traffic will have to me transferred from one network to the other. Following the acquisition, TeliaSonera will have approximately 1.1 million mobile customers in Denmark, and will be the third largest Danish mobile operator.
    Ovum’s Carrie Pawsey said the deal made good sense for France Telecom in the face of a highly competitive Danish market, but queried whether the deal was as good news for TeliaSonera.
     “The sale of Orange Denmark has been expected for some time. FT is focusing heavily on the profitability of its foreign investments and has already decreased its exposure in Thailand and exited the Swedish market.
    Denmark has one of the most competitive mobile markets in the world: it has five mobile operators, four large MVNOs, over 10 other MVNOs and Enhanced Service Providers (ESPs), just 5.2 million subscribers and margins well below the European average. Consolidation has therefore been widely expected, and kicked off with TDC buying Telmore, the largest MVNO, at the beginning of 2004 and Sonofon buying CBB Mobil, the third largest MVNO, in April 2004.
    The deal itself looks good for France Telecom. It values Orange Denmark’s customers at euro 1000 each, while the ARPU posted by Orange in Denmark was EUR373 in 2003. But is it so good for TeliaSonera? There is no real value in acquiring a second GSM network and TeliaSonera will have to shut one down to save costs (estimated to be about euro 51m). And euro 1000 per new customer is a high price just to become Denmark’s third player, particularly if you consider that TDC paid euro 88 per subscriber in its acquisition of Telmore. We expect further consolidation to come.”
    Initially, TEliaSonera said, no changes will be made in  existing customer relationships. Existing products and services of both organisations will continue to be delivered under separate existing brands until at least spring 2005, and no significant organisational overlaps are expected.