September 4, 2014 / 8:47 AM / 3 years ago

Tele2 expects new Dutch network to raise profits

STOCKHOLM (Reuters) - Telecoms operator Tele2 expects to boost earnings from its key Dutch unit when clients’ phone calls are moved to a new fourth generation (4G) mobile phone network later this decade, the firm’s technical chief told Reuters.

A logo is on display at a Tele2 company's sales office in St. Petersburg, April 2, 2013. REUTERS/Alexander Demianchuk

The Swedish company sees the Netherlands as an important growth market, alongside Kazakhstan, and expects most of its Dutch clients to make their phone calls on the 4G network from 2017-2018.

European mobile phone users currently talk on second and third generation networks, while 4G, also known as LTE, is used for data surfing, but this is due to change with the arrival of so-called Voice over LTE (VoLTE) handsets.

Tele2 is currently building a 4G network in the Netherlands while renting 2G and 3G voice and data capacity from T-Mobile, which undermines profitability.

Joachim Horn, Tele2’s head of technology, predicted VoLTE phones will be available for the mass market in the first half of 2015 and that around 80 percent of the firm’s clients will own such phones two or three years later.

“In the Netherlands there is a very big case to move voice to LTE because we can then also keep the data session on LTE and we can minimize the roaming cost,” he said in a Reuters interview.

“That will have an impact on profitability in the Netherlands, moving basically from an MVNO (Mobile Virtual Network Operator) to an MNO (Mobile Network Operator) case,” he added.

When a person browses the internet or watches a movie over an LTE network and receives a call without VoLTE being available, the data session is transferred to the 3G-network with slower data speed.

Horn said VoLTE will also improve voice quality compared to 2G and 3G networks, and that establishing connection is faster.

Tele2 has not yet revealed the timing of its Dutch 4G launch, and said in June it could happen this year, next year or the year after, but several analysts say they expect it to happen in late 2014 or early 2015.

The company estimated its revenue-based market share in the country at just 2.7 percent for the first quarter, behind market leader KPN’s 37 percent, Vodafone’s 30 percent and T-Mobile’s 23 percent.

But Tele2 expects the launch of 4G services in the Netherlands to accelerate the intake of new customers, and targets a long-term market share of 20 percent.

The Sweden-based operator, which bought two mobile licences in the Netherlands in late 2012 for about 1.4 billion Swedish crowns($200.16 million), booked a loss before interest, tax, depreciation and amortisation of 59 million crowns in its Dutch mobile phone unit in the first half of the year.

Editing by Terje Solsvik

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