The Swedish Telecommunications Market 2002 - PTS-ER-2003:21
30/06/2003
Two phenomena have, more than others, had an impact on the Swedish telecommunications market during 2002. The first is a supplement to the pre-selection reform, whereby it is no longer necessary to dial an area code when making a local call to be able to use a pre-selection operator. Through this change, the conditions have now become more equal between the operators and it has been possible to increase competition for the sub-service national telephony. However, this change has probably not further increased interest among telephony customers in choosing a pre-selection operator. The other phenomena is that the growth in the number of customers to Internet access with higher transmission capacity continues to be strong, even if it is not as great as it was in 2001.
The markets for fixed telephony, mobile telecommunications services and Internet access had a total turnover of SEK 46.5 billion during 2002, which is an increase of 3.5 per cent compared with 2001. The operators’ revenue per month and household for these services was on average 534 kronor during 2002, an increase of 7 per cent. The market value of fixed telephony alone amounted to SEK 25.8 billion, which is SEK 0.8 billion less than the previous year.
At the end of 2002, there were 5 485 000 customers with fixed telephony; of these 1 535 000 were pre-selection customers, the others being directly connected telephony customers. Viewed overall, it is only TeliaSonera that has directly connected telephony customers. During 2002, the number of pre-selection customers increased by 8 per cent or 113 000. Of the total number of pre-selection customers, 1 375 000 were private. The number of private customers for fixed telephony amounted in total to 4 475 000, which means that almost a third of all private customers for fixed telephony have chosen an alternative operator to TeliaSonera.
Towards the end of 2002, some operators launched subscriptions for IP telephony in the broadband network. The customer could connect his ordinary fixed network telephone to the broadband network via a decoder and can therefore call as usual. The customer is thereby given an opportunity to terminate his ordinary fixed telephony subscription with TeliaSonera.
The market value of national calls amounted during 2002 to SEK 7.9 billion, of which Internet calls are estimated to comprise a fourth. Revenues for national calls are SEK 75 million less than during 2001. This decline is referable to lower revenues from both dial-up access to the Internet and from ordinary national telephone calls. This in its turn results from the lower revenues for reduced traffic, not to lower market prices. TeliaSonera’s prices for national calls have remained stable since the spring of 2000, when TeliaSonera introduced a uniform tariff for local calls and Sweden calls. It is natural that revenues from dial-up access to the Internet reduce as we can now see, and will continue to see, increasing numbers of Internet users opting for some kind of fixed connection, particularly major users. One reason for traffic for ordinary national telephone calls reducing is probably the increased use of mobile telephones. The alternative operators to TeliaSonera had, during 2002, a market share of 41 per cent of the value of national calls. This is a full 11 percentage units more than during 2001. It was mainly on two occasions that these alternative operators have been able to take greater market shares: first during 2000 following the implementation of the pre-selection reform in 1999, second during 2002 since pre-selection in February of the same year also functioned for local calls, that is to say also without having to dial the area code.
Calls from fixed networks to mobile networks constitute, at SEK 5.5 billion, a rather large proportion of the total market value for fixed telephony. During 2002, this share was almost 22 per cent. PTS observes that TeliaSonera’s prices for calls from the fixed network to other operators’ mobile networks have not changed since 2000. The price for calls from TeliaSonera’s fixed network to TeliaSonera’s own mobile network reduced during 2001.
The market for international calls is the kind of call within fixed telephony that has been exposed to competition for the longest time in Sweden, something that has also entailed continuously reducing call tariffs for the consumer. However, it appears that this trend has been broken in recent times. PTS’s figures now show that there is a balanced development of growth between traffic volume and turnover; during the year traffic volume increased by just over 5 per cent, and at the same time the value of the market for international calls increased by almost 5 per cent. During 2002, the turnover for international calls was SEK 1.48 billion or almost 6 per cent of the total market value of fixed telephony. The alternative operators to TeliaSonera had in 2002 a market share of 57 per cent, which is 5 percentage units more than in the previous year.
The growth figures for mobile subscriptions have now stabilised at a level around ten per cent. During the year, the number of subscriptions increased by in total 11 per cent and was 7 949 000 as of 31 December 2002. The total number of subscriptions as a proportion of the entire population corresponded to 89 per cent on 31 December 2002. The interest in using pre-paid cards instead of contract subscriptions continues to increase, something which has resulted in 55 per cent of all GSM subscriptions currently comprising pre-paid cards, an increase of 5 percentage units.
The new service providers for mobile telecommunications services are still rather small, with a total market share of 2 per cent of the total number of subscriptions, which corresponds to 153 000. Even if the service providers nonetheless attracted customers to their GSM subscriptions during 2002, the increase in the number of subscriptions is not much greater than during 2001. Significantly greater growth is required among the service providers to create sufficient impetus for increased competition.
The turnover for mobile telecommunications services increased by just over 6 per cent from SEK 16.2 billion during 2001 to SEK 17.3 billion during 2002. PTS notes that the average monthly revenue per mobile customer is continuing to decline, from 203 kronor per month during 2001 to 193 kronor per month during 2002.
The growth in the number of SMS (text messages) sent reduced substantially during 2002. During the year, 1.32 billion SMS were sent, which is an increase of 30 per cent. During 2001, the number of SMS sent more than doubled. At the same time as a GSM customer in Norway on average sends 56.6 SMS per month, almost four times as many as a Swedish GSM customer, it appears that the number of SMS in Sweden is approaching the ceiling. Swedish GSM customers sent on average 14.9 SMS per month. The price for sending an SMS varies today from just under one krona to 1.5 kronor. PTS has previously concluded that the continued high prices suggest inadequacies in the way in which the market functions and that there is scope for increased price competition. This must still be deemed to be a valid conclusion, as prices have basically remained unchanged since the beginning of 2000, that is to say for 3 years.
The market for GPRS did not accelerate during 2001 or 2002. On 31 December 2002, there were 105 000 subscribers who had used GPRS at least once during the fourth quarter of 2002.
The market for Internet access is now in a period of great change that is clearly linked to the transfer from dial-up access to fixed access. Competition in the market for Internet access has until now been rather good, but as of a gradual transfer to fixed access, the issue of control over the access network has become of increasingly great importance. As a consequence, competition in the market for Internet access with higher transmission capacity is worse than for dial-up Internet access.
The growth in the number of customers with Internet access continues to be rather strong, even if it is less than during previous periods. During 2002, the number of customers increased by 368 000 to 3 187 000, which corresponds to growth of 13 per cent. As of 31 December 2002, PTS estimates that 654 000 private customers with Internet access were connected to the Internet via some form of access with higher transmission capacity. The corresponding figure for 31 December 2001 was 425 000. The form of access ADSL dominates development and now represents 13 per cent of the total market for private Internet accesses. The economic importance of Internet access as a service in the Swedish telecommunications market continued to increase during 2002. It is primarily the fixed charges for always-on connections that provide the operators with increasingly great revenues. These revenues alone increased by 105 per cent in value during the year and amounted to SEK 2.93 billion. They thereby exceed for the first time the revenues that are generated by the minute-based traffic for dial-up Internet. In total, the turnover of the market for Internet access lay at SEK 5.5 billion, representing growth of 19 per cent.