BMI has long held the view that, although Norway represents one of the highest value markets in the world, on a per capita basis, intense competition and market saturation leave few organic growth opportunities for new and existing investors alike. This view is amply demonstrated by developments surrounding the country's latest alternative player, Tele2-backed Network Norway. The company failed to secure additional spectrum in Q413 when it was outbid by Access Industries. It may now sell itself to Access or negotiate the use of Access' frequencies (the latter option seems unlikely as Access wants to use the spectrum to reinvigorate its minor mobile broadband business, Ice.Net). Prior to that, Tele2 announced plans to merge with Network Norway and consolidate its surviving fixed telephone service businesses in order to remain competitive. With other fixed telephony and broadband companies also exiting the market or consolidating, it is clear that the sector continues to revolve around three or four major players.
- The fixed-line voice telephony market contracted faster than expected in H113 and we do not expect the situation to have improved in the second half of the year. Thus, BMI believes there were 1.277mn fixed lines in service and the end of 2013, a figure that will fall to 1.138mn by 2018.
- The mobile market also underperformed in 2013, if preliminary data are anything to go by. BMI now estimates a year-end 2013 subscription base of 5.972mn, a figure that will slowly rise to 6.169mn by 2018.
- Driven by demand for rich media services, such as network-agnostic Internet TV, the broadband market represents the only real area of organic growth. BMI estimates a year-end 2013 subscription base of 2.747mn, rising to 3.032mn in 2018.
Key Trends And Developments
Tele2/Network Norway's inability to crack the Norwegian market with low-cost products and services serves as a reminder that mature markets can represent considerable risks to even the most experienced of investors. Access Industries' Ice.Net unit had similarly ambitious plans when it first entered the market and also failed to make any meaningful impact in a market dominated by a large fixed-line/mobile incumbent, a moderately successful alternative mobile operator and a highly fragmented broadband services market. We therefore see little value in Network Norway's current business to any investor considering rescuing it. That said, some of the larger broadband players - such as Get and Telio Telecom - may be tempted to risk making an offer, driven by the need to use mobile to diversify into the converged services market and slow the encroachment of network-agnostic over-the-top (OTT) services such as Netflix.