TeliaSonera: Lower Roaming Charges To Hit Profit Short Term
May 12 2011 - 8:05AM
Dow Jones News
Swedish telecommunications company TeliaSonera AB (TLSN.SK)
Thursday said it has lowered data roaming charges for its customers
traveling within the Nordic and Baltic countries by 90%, a move
that the company's chief executive Lars Nyberg said is likely to
hurt profit in the short run.
Telia will charge SEK29 ($4.60) a day, for 20 megabytes of data
traffic within the Nordic and Baltic countries for the company's
mobile telephony subscribers. TeliaSonera previously charged
SEK22.30 for every megabyte of data roaming within the Nordic
countries.
"For some time I've been embarrassed by the cost of data roaming
for our customers," Nyberg said at a press briefing in Stockholm on
Thursday.
Nyberg said that data roaming charges, which operators levy on
customers for using mobile Internet abroad, are the cause of much
uncertainty which puts them off using the service at all. Moreover
he said that the prices that operators charge for roaming are
"astronomical" compared with the cost of providing the service.
"I don't mind making money, but I don't like stealing it,"
Nyberg said.
The issue of data pricing is a key one for operators across
Europe, as they struggle to overcome the decline in revenue of
fixed-line and mobile voice services. They also face increased
competition and regulation that has slashed the cost of text
messaging for consumers and lowered the fees operators can charge
eachother to connect customers of rival carriers to their
networks.
Amid the proliferation of mobile data caused by surging demand
for smartphones, carriers are also investing heavily in faster
networks, while some have even called for the major content
providers that generate most traffic, such as Google Inc. (GOOG),
to be charged for using them.
Nyberg, however, appears more sanguine on the issue.
According to the chief executive, the lower roaming tariff will
initially hurt TeliaSonera's earnings, but he is a "firm believer"
that shareholders will benefit from the price cuts in the long run
as more subscribers use mobile Internet.
"It turns out that we charged 10 times more for a voice minute
15 years ago than we do today, but we make much more money today,"
he said.
TeliaSonera doesn't break out how much it earns from roaming
charges, but talking to Dow Jones Newswires, Nyberg said cutting
prices for data roaming will knock its profit by "maybe SEK100
million to SEK200 million" in the short term.
In the first quarter, Teliasonera's net profit was SEK4.65
billion on sales of SEK24.73 billion.
Nyberg said that his peers in the Nordics region share
TeliaSonera's concern about roaming prices and are likely to follow
suit. Teliasonera's largest rivals in the region are Telenor AS
(TEL.OS), Tele2 AB (TEL2-B.SK), Elisa Oyj (ELI1V.HE) and TDC A/S
(TDC.KO).
"I think that the position TeliaSonera takes on this issue is a
clear message to the industry that they have got to follow," he
said, adding that he isn't afraid of starting a price war.
"We have set a low bar. However, I think the prices we have set
for data roaming are in accordance with what customers think is
fair to pay and I'm sure that we can make money at this price level
providing we increase our volumes," he said.
-By Sven Grundberg, Dow Jones Newswires; +46-8-5451-3098;
sven.grundberg@dowjones.com