Orange pays EUR61 million to complete diplomatic withdrawal

23 Apr 2004

Orange is reported to have reached a EUR61 million settlement with its business partners in 3G Infrastructure Services (3GIS), Hutchison Whampoa and Vodafone, to end their ongoing litigation in Sweden. The three companies had entered into a deal to jointly build a 3G network in the country, but in late-2002 Orange announced it was withdrawing from the Swedish market throwing the triumvirates’s arrangement into disarray. At that time Orange said it would have difficulties in meeting the rollout requirements laid down by the licence and applied to the country’s Post and Telecoms Authority (PTS) for an extra three years to meet them. It also requested that it be allowed to provide a reduced coverage of 8.3 million inhabitants, instead of the 8.86 million specified, a 6% cut but one which would have meant not having to provide coverage to great swathes of rural Sweden. In September 2002, however, the PTS concluded that there was no justification for granting less stringent licence conditions and denied the request prompting Orange to announce that it was withdrawing from the Swedish market altogether. The decision landed Orange with a bill for EUR109 million, its portion of the cost of building the network with Hutchison and Vodafone.

In April 2003 Orange requested that the PTS allow it to transfer its Swedish 3G licence to a subsidiary operation, but its petition was denied after Hutchison Whampoa and Vodafone said the French cellco was intending to sell its licence in a bid to escape its obligations regarding the co-financing of the 3GIS’ UMTS infrastructure. In December 2003 the Swedish newspaper Dagens Industri announced that TeliaSonera was in negotiation with Orange to acquire the licence, although at the time neither telco confirmed this. Then, in January 2004 Svenska UMTS-nat, a 50/50 joint venture between TeliaSonera and Tele2, agreed to purchase the licence. Orange applied to the PTS for permission to assign the licence and in order to comply with the terms of the new licence, Svenska UMTS-nat, an original 3G licence winner, said it would expand its network coverage in a number of metropolitan areas. Meanwhile, Vodafone and Hutchison, which had already invoked a clause in the contract making Orange liable for a EUR109 million penalty, launched arbitration proceedings in the Stockholm Chamber of Commerce claiming EUR52 million in damages. The EUR61 million to be paid by Orange includes EUR5.5 million from the sale of its UMTS licence to Svenska UMTS-nat. However, the EUR5.5 million will have to be returned to Orange if the sale falls through.

By the end of 2003 Sweden’s mobile market had grown to number 8.572 million subscribers, taking the country’s cellular teledensity from 70.9% at the end of 2000 to over 96%.

PriMetrica’s GlobalComms

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