Crunch time in the roll-out of UMTS in Swedish electronic communications markets?

16 February 2005

Henrik Nilsson

The Swedish National Post and Telecom Agency (PTS) awarded four licences on 16 December 2000 to provide network capacity for mobile telecommunications services in accordance with the UMTS/IMT-2000 Standard and the GSM Standard respectively (UMTS or 3G-licences).

The winners of the ‘beauty parade’ staged by the PTS were HI3G (a joint venture between Hutchison and the Swedish company Investor), Vodafone (then Europolitan), Tele2 and Orange. Orange has since returned its licence while Tele2 has transferred its licence to Svenska UMTS-Licens AB (SULAB), a joint venture with the Swedish-Finnish incumbent, TeliaSonera.

The PTS interpreted the Telecommunications Act as denying the Agency the option of holding an outright auction for the licences and so awarded the licences through a ‘beauty parade’. In practice, the process amounted to much the same thing.

In the bid evaluation process, would-be operators were given points according to what share of the population and of the geographical territory of Sweden would be covered, as well as for the degree of coverage reached by 2003, 2006 and 2009 respectively. In order to win a licence, the bidders strived to receive a maximum number of points through pledging, inter alia, a fast and far-reaching roll-out of coverage. All the winning tenders promised that coverage would extend to a number equivalent to 99.98 percent of the population in Sweden by 31 December 2003. Doubts were expressed at the time the licences were awarded about the feasibility of the rate of promised roll-out, to which the PTS responded that it intended to enforce the conditions attached to the licences. Leaving the issue of technical feasibility aside, it was clear at the time that a network roll-out at the pace necessary would be very expensive.

Regarding coverage, the final licence conditions, identical in this respect between the different licence holders, required licence holders to meet their pledges and demonstrate this to the PTS no later than 1 March 2004.

It was revealed on 1 March 2004 that the coverage of the three licence holders, then remaining in the 3G market, ranged from 66 percent to 74 percent.

On 17 May 2004, the PTS, in accordance with chapter 7 section 4 of the Electronic Communications Act, formally notified the licence holders that they were in breach of their licence conditions. The PTS took into consideration the fact that the processing of the building permits required for construction of the many necessary radio masts had taken much longer than could have reasonably been foreseen. It granted a reprieve until coverage would be completed on 31 December 2004.

On 28 June 2004, the licence holders jointly applied to the PTS for the required network signalling strength as set out in the licence conditions to be lessened. This would mean that fewer transmitting base stations would need to be constructed. The operators further requested that coverage requirements be deferred until the end of 2007. In support of this application, the operators maintained that the granting of building permits continued to be inordinately slow due to unforeseen resistance to the erection of new radio masts by the Swedish armed forces and by municipal authorities, on the basis of environmental and electromagnetic radiation concerns.

After a commissioned study indicated that planned mobile services would still be feasible at a lower signalling strength, on 7 December 2004 the PTS accepted an adjustment of the licence conditions in this regard. The PTS, however, rejected the demand for an extension of the time in which to achieve coverage. Though the Agency agreed that circumstances referred to by the operators could not in all ways have been foreseen, the Agency expressed the view that there were no grounds to further prolong the reprieve. However, the adjustment in the licence conditions regarding the signalling strength required a new notification in accordance with chapter 7 section 4 of the Electronic Communications Act. As this section of the Act allows the recipient of a notification “reasonable time” for rectification, the operators concerned were given further breathing space.

New figures from the licence holders showed that coverage rates as at 1 December 2004 ranged between 84 and 86 percent of the licence conditions’ requirements.

On 27 January 2005, the PTS issued new notifications to the operators concerned that they were in breach of their licences regarding coverage. The operators were given until 28 February 2005 to demonstrate to the PTS their compliance with the licence conditions, and were formally notified that the Agency may issue such orders and prohibitions as are necessary for a rectification to take place.

The Agency is authorised under chapter 7 section 5 of the Act to take steps such as revoking a licence, altering licence conditions or deciding that the party concerned should completely or partially cease operation, except where the violation is of minor importance. The Agency may also issue such additional orders or prohibitions necessary to ensure compliance with the Act, or the decisions on obligations or conditions made under the Act, or regulations issued under the Act.

However, the same section of the Act specifies that if a radio transmitter is used to a lesser extent than required by the licence conditions, such a licence does not have to be revoked if there are special reasons for not doing so or the purpose of the order can equally well be satisfied by an amendment of the licence conditions. An order or a prohibition in accordance with this section may be combined with a fine.


Despite the presence of a number of legitimately unforeseeable circumstances, the PTS will probably take measures to enforce the licence conditions. The interesting question will be how the Agency assesses the various mitigating factors that the licence holders will inevitably demonstrate before it.

The PTS has commissioned a detailed technical model to assist it in calculating the realistic time period still required for each licence holder to comply with the coverage requirements. This model is presently the subject of a consultation with the operators which will end on 24 February 2005. Provided that the model is agreed, it is reasonable to assume that the PTS will use it to set a final time period for the completion of coverage.

Market operators in Sweden expect that the PTS, in order to retain its credibility, will combine a coverage requirement with more immediate administrative proceedings. Perhaps some guidance as to the outcome of these proceedings can be found in neighbouring Norway. TeliaSonera’s Norwegian subsidiary, Netcom, holds one of three 3G licences there. The Norwegian Post and Telecommunication Authority, and later the Ministry of Transport and Communications, found Netcom to be in breach of its licence coverage requirements. In a final decision on 14 January 2005 by the Government in Council (“Statsråd”), Netcom was fined NOK 30,000 (approximately EUR 3,600) per day until such time as the company was in compliance. The fine is to be reduced by NOK 5000 (approximately EUR 600) for every 75 new base stations brought into use on the network. The sum has been calculated to take account of Netcom’s estimated savings in not completing its coverage.

The Norwegian authorities indicated in their decisions that any extenuating circumstances had been accounted for at earlier stages of the compliance process. The position of the Swedish PTS and the courts remains to be seen.