Tele2 Sees Subscriber-Base Growth Slowing In 2005

STOCKHOLM -(Dow Jones)- Swedish telecommunications operator Tele2 AB (TLTOB) sees subscriber-base growth slowing in 2005 to a net customer intake of about 1 million per quarter, down from almost 1.3 million on average in 2004.

"Customer intake in the first quarter (2005) is likely to be lower than in the fourth quarter (2004)," Tele2 Chief Executive Lars Johan Jarnheimer told a media conference.

Pricing pressure in the Swedish mobile-telecom market was strong in 2004, with Tele2's revenue in its home market falling 5.1% during the year despite rising demand.

Tele2 Chief Financial Officer Haakan Zadler said prices in Sweden fell at least 10% last year. Tele2 expects price pressure to continue but ease from the 2004 level.

The company said its profitability in Sweden during the next quarters will be hurt also by a push to sign up customers for fixed-line subscriptions.

Tele2 hopes to convince at least 50% of its 750,000 customers that have preselected Tele2 to also convert fixed-line subscriptions in the first half of the year.

The estimated cost, including fees to network owner TeliaSonera AB (TLSN.SK), for each subscriber that signs up, is SEK300, giving a potential cost of up to SEK250 million.

Tele2 has said it will start paying for use of a third-generation mobile telecom network it has built together with TeliaSonera in Sweden. The cost for the first quarter is projected at SEK50 million to SEK60 million. That cost is later set to increase to SEK90 million to SEK100 million per quarter.

The estimated cost for each subscriber that signs up is SEK300, giving a potential cost of up to SEK250 million.

Usage of the network is low, however.

"Value-added services in 3G has seen some uptake but it's still predominantly normal voice calls," said Jarnheimer.

He wouldn't say how many customers Tele2 has for 3G, but indicated the figure is low, as the company hasn't pushed the service. "We see it picking up towards the end of the year, possibly by summer," he said.

Jarnheimer also expressed skepticism toward making further investments in Finland. Tele2 has a license for 3G mobile telephony in the country and operates a second-generation service as a virtual operator. Discussions are ongoing with authorities about the 3G license.

Overall Jarnheimer sees Tele2 aiming to become a mobile operator in several countries around Europe by renting capacity on other companies' networks.

"We have talked about France for a long time. Now we're a little bit closer. Possibly something could be in place by summer," said Jarnheimer.

He also sees Tele2 expanding in the broadband Internet market, where The Netherlands is high on the agenda.

Tele2 earlier Wednesday reported fourth-quarter net profit dropped 48% from the year-ago period and said profitability in the next few quarters would be similar to its fourth-quarter performance.

-By Magnus Hansson, Dow Jones Newswires; +46 8 545 130 91; magnus.hansson@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 16th February 2005