Annual Report 2007 - Company Description Market and Customers: Market Position
Competition and prices
TeliaSonera is in the business of providing high quality telecommunications services, including packaging and carrying content like sound, images, data, information, transactions and entertainment. Parts of these businesses are subject to tough price competition, particularly the fixed-voice business, which has been decreasing over the past few years.
The mobile business has also been faced with strong competition, and mobile voice prices in the Nordic region are declining. However, average revenue per customer is holding steady at approximately the same level since the price decline per minute is compensated by higher usage, increasing revenues from value-added services and datacom services. A risk factor in this context is the low flat rate pricing of mobile data, which could hamper the potential revenue growth, and result in increased costs due to higher data consumption.
Broadband pricing development is more stable in one respect as the amount billed to the customers is fairly stable in most markets. However, in the case of broadband, customers increasingly demand higher bandwidths, an increase that is rarely offset by corresponding price increases. However, to compensate for the decline, a number of related services are launched.
Market shares
TeliaSonera is the leading provider of telecommunications solutions in the Nordic and Baltic region and the mobile communications leader in Eurasia. TeliaSonera is present in 18 countries, including associated companies.
Competition is intense in all mobile markets, but particularly in the mature Nordic and Baltic mobile markets where the number of new customers, but not necessarily new SIM-cards, in the market are few. In these markets, competition is focusing on adding services and increasing service usage.
In Spain, TeliaSonera is rolling out its own 3G-network according to demand and license conditions. Yoigo, TeliaSonera's Spanish mobile operator is in a market entry phase, with efforts spent on building a customer base through an innovative market mix of pricing, distribution and service packaging.
In the Eurasian markets, the growth potential is even more important. With less developed fixed line services and a mobile market only partially penetrated, the growth potential lies not only in attracting voice calls to the mobile networks, but also in increasing the customer base significantly, and further ahead also in non-voice services.
The Eurasian economies are still growing at higher rates than their Western European counterparts, and the Economist Intelligence Unit predicts that the relatively high growth rates will continue. For example, in Azerbaijan gross domestic product growth is estimated at about 30 percent 2007.
Equally, TeliaSonera is a leader in broadband in Sweden as well as in the Baltic countries. In Finland, the situation is somewhat different with three equally strong providers. In Norway TeliaSonera is number two and in Denmark number three, and a challenger to the national incumbents in both markets. For broadband, where service penetration is still growing, the competition is somewhat different in that the focus is on customer acquisition along with increased selling of additional services, like triple play offers including voice, Internet and TV.
A new market context
Since the telecom market is converging with industries such as media, entertainment and the IT industries, a new competition context is evolving with a value chain that in some respects covers a larger set of customer services. In the consumer market the convergence is centered on media, content and devices such as the mobile phone, TV and smart home gateways resulting in the offering of triple play.
Besides new roles opening up for operators, new business models are also opening for other companies to take a more active role in more parts of the value chain, in both offering and developing new services. Among companies like Nokia and Google many announcements were released on this theme in 2007, for example news that they were entering into the services business or the service development field. Likewise, the emerging market for mobile advertising opens for new business models and new business relations where traditional advertising platform companies as well as operators want to play a role. As a consequence, the value chain, its components and its relationships are changing. The emerging business context does not only consist of telecom operators but also of a series of other companies wanting to participate.
This market convergence, talked about for many years, but that is only now materializing, is resulting in increased competition, but more importantly also in new opportunities and a wider selection of services for our customers.
Converging MarketsClick to enlarge
TeliaSonera is in the business of providing high quality telecommunications services, including packaging and carrying content like sound, images, data, information, transactions and entertainment.
The transformation of the business context is not only happening in the consumer market but also in the business and IT services markets. From a traditional business split where the distinction between IT services and IT consulting services on one side, and telecom services on the other side, was fairly clear, there is no longer a clear separation. Companies are expanding their offerings by taking on a larger role in more parts of the value chain. Various related industries are now working in an eco-system with dependence on each other for partnerships, but also in competition with one another. We do however realize that totally different sets of skills are needed in the media, telecom and IT-services industries, respectively.
Consolidation
Over the past years, the European telecom market has started consolidating. Just as in any other industry, a growth phase is followed by a mature market phase, with pressure on top line growth and margins. As a result, the stronger players seek to strengthen their positions, and thereby start consolidation on the market. In our markets, there has been significant local consolidation over the past years, where the larger telecom operators have acquired the smaller peers in their own markets or in neighboring markets.
"We operate in one of the world's most rapidly changing industries."
Lars Nyberg, President and CEO, TeliaSonera
We are living in an all-communicating society. We spend more time communicating with friends, colleagues and customers at the same time as new technologies are gaining ground as means of carrying our communications.
The demand for being "always-on", and expectations on others, friends as well as companies, stores and government offices, to always be available is growing simultaneously. Demand for capacity is virtually unlimited now and in the future.
TeliaSonera believes that fixed lines will be the most efficient technology for many years to service fixed locations, i.e. homes and offices, in regions where fixed networks already exist. Complementary wireless technologies are being explored to support areas where economies are not supporting fixed network presence. In this context, an operator such as TeliaSonera is faced with both numerous opportunities and challenges.
The market is growing as more customers use a wider range of services, such as mobile Internet, TV over broadband, music downloading and online socializing. The increased usage generates a growing amount of data in the form of images, sound and data, to be transferred at higher and higher speeds. In parallel, customers are growing less content with being able to access the Internet just from the office or from home, but rather want to connect anytime, anywhere.