Telenor ASA

1855–2003

Telenor ASA is Norway's leading telecommunications group. As the former state-owned telephone monopoly, Telenor remains the dominate provider of fixed-line telecommunications services in the country. Fixed-line network operations continue to account for 35 percent of the group's revenues. Telenor also controls 56 percent of Norway's mobile telephone market, through subsidiary Telenor Mobil. Yet the small size of its domestic market has led Telenor to look elsewhere for growth, and in the early 2000s, Telenor has emerged as one of the most geographically diversified of Europe's major telecom groups. For its international expansion, Telenor has targeted especially the mobile telephone market. In Scandinavia, the company operates djuice, through subsidiary Telenor Mobile in Sweden, and owns Sonofon, the number two mobile service in Denmark. Beyond Scandinavia, the company owns 100 percent of Hungary's Pannon GSM, that country's second largest cellular service provider, and 100 percent of Promonte, the leading mobile service in Montenegro. Telenor also has entered Ukraine through a 56.5 percent stake in Kyivstar GSM; Russia, with a 29 percent stake in VimpelCom; and Austria, where it owns 17.5 percent of that country's ONE mobile service. Further abroad, Telenor has entered Malaysia, through a 61 percent stake in that country's DiGi cellular phone group; Bangladesh, with 51 percent of GrameenPhone; and Thailand, with a 40.3 percent stake in DTAC. Telenor also owns a license to roll out cellular phone service in Pakistan. Telenor's other operations include television broadcasting via cable and satellite. The company owns 100 percent of satellite broadcaster Canal Digital. Telenor is led by CEO Jon Fredrik Baksaas and is listed on the Oslo and NASDAQ Stock Exchanges. The Norwegian government holds more than 53 percent of the company but has passed legislation allowing its stake in Telenor to drop below 49 percent. In 2003, Telenor posted revenues of $7.9 billion.

Norwegian Telecom Origins in the 19th Century

Norway, like its Scandinavian counterparts, emerged as one of the world's most technologically savvy markets at the start of the 21st century, boasting some of the highest penetration rates for technologies such as mobile telephones, high-speed Internet, and the like. Yet this represented somewhat of a tradition for the country, which had built its first telegraph line in 1855, and its first telephone network, connecting Arendal and Tvedestrand, in 1878. By 1880, the country already had its first telephone company, The International Bell Company, which began operating a telephone network in Oslo. Within six months, the service had attracted 300 subscribers. International service began in the country in 1893, linking Christiania and Stockholm.

For the most part, development of the country's early telephone grid was performed by private companies. In 1901, however, the state-owned Norwegian Telegraph Administration (NTA) made its first move to establish control over the sector, taking over the telephone exchange serving Christiania. The NTA gradually took over the privately controlled players in the market. Yet the last private exchange was absorbed into the NTA only in 1967, and the last privately owned telephone company, Andebu Telephone Association, became part of the NTA only in 1974.

By then, NTA had pointed the way toward Telenor's future mobile telephone interests. In 1967, Norway introduced one of the world's first mobile telephone systems, an analog-based, manually operated system. Two years later, after the NTA inaugurated Denmark's first data transmissions, the NTA changed its name, to Televerket, otherwise known as Norwegian Telecommunications. With the purchase of Andebu, Televerket gained control of the monopoly on telephone and telecommunications services, a position it retained until the 1990s. Nonetheless, the process of deregulating the Norwegian market began as early as the late 1980s, when Televerket lost its monopoly on the sale of telephone handsets in 1988.

Expansion in the 1990s

After acquiring a majority stake in Ukraine's Kyivstar in 2002, Telenor returned to its home region, acquiring struggling Swedish telecom group Utfors for SEK 264 million ($30 million).

1981–2004

By then, however, Televerket had launched what was to become its most dynamic operation at the onset of the 21st century. In 1981, the state-owned company became one of the first in the world to roll out automated mobile telephone services, launching its Norwegian Mobile Telephone subsidiary, or NMT. By the beginning of the next decade, Televerket had begun preparation to launch a new generation of mobile telephone service, based on the GSM protocol soon to be adopted throughout Europe.

Televerket launched its GSM service in 1993. By then, the company also had expanded into television broadcasting, with the acquisition of the Thor satellite a year earlier. The move enabled Televerket to emerge as the dominant provider of satellite-based broadcasting in the Scandinavian region. The company also began restructuring ahead of the Norwegian telecommunication market's deregulation and its future privatization. The restructuring effort required some four years to complete, and included Televerket's transformation from a state-owned enterprise to a public corporation in 1994.

In the meantime, Televerket had begun to leverage its early experience in mobile telephony and with the GSM protocol in particular. In 1993, the company joined the consortium setting up the Pannon GSM mobile telephone network in Hungary. Televerket's initial share of Pannon GSM stood at just 14 percent. Over the next decade, however, the company boosted its stake in the Hungarian provider, which claimed the number two share in that market, to 100 percent control. The company also acquired a 13 percent stake in Northwest GSM, which launched cellular phone services in St. Petersburg in 1995.

Televerket changed its name to Telenor in 1995 as it prepared to extend its international operations. In 1995, the company won a license for establishing a GSM-based mobile network in Montenegro. For the Montenegro license, Telenor joined the European Telecom Luxembourg (ETL) consortium, which also included W-Com Investments, Westsouth Telecom, and TopStar Shipping and Trading. ETL then formed a joint venture with Montenegro's PTT to launch ProMonte, the country's first and largest mobile phone service, which became operational in 1996.

The following year, Telenor bought a 51 percent stake in GrameenPhone, in Bangladesh. That group had been granted a license to build a GSM-based network in Bangladesh in 1996, and by 1997 had launched commercial mobile telephone services in the country. Into the 2000s, GrameenPhone remained the only mobile phone provider offering nationwide coverage in Bangladesh.

Telenor continued seeking out deals as the full deregulation of its domestic market approached. The company joined consortiums acquiring licenses and building GSM-based networks in Germany, Ireland, Greece, and Austria in 1997 alone. In that year, Telenor also boosted its satellite television division, through an alliance with NetHold BV/Canal Plus that ultimately led to Telenor acquiring a stake, then full control of Canal Digital in 2004.

1998–2004

Mid-Sized Telecom Group in the 2000s

The full deregulation of the Norwegian market was completed in 1998. Telenor soon began an effort to reposition itself among Europe's major telecom groups. In 1998, the company began negotiating with Swedish counterpart Telia for a merger of the two companies. The combination of the two groups held a great deal of promise and was greeted enthusiastically, except by the Norwegian and Swedish governments and, indeed, by Telenor and Telia themselves.

The initial round of talks quickly broke down. In 1999, the two sides tried again, and this time came so far as to announce an actual merger agreement. Yet the merger never materialized, as a variety of factors, not least of which was national pride, seemed to have doomed the merger from the outset. Hopes remained strong that the two companies might eventually work out their differences. The merger between Telia and Finland's Sonera in 2002, however, put an end to those hopes as well.

Despite the collapse of the Telia merger, Telenor pushed ahead with its public offering, listing on the Oslo stock exchange and the NASDAQ. As part of the offering, the largest ever in Norway, the Norwegian government reduced its holding to 77 percent and later passed legislation allowing it to reduce its stake to below 49 percent in order to facilitate Telenor's ability to make cross-border deals. The government continued to reduce its stake into the 2000s, reaching less than 53 percent by the end of 2004.

Telenor became an active deal-maker in the 2000s. After a hostile takeover attempt for Ireland's Esat group failed, the company turned instead to Denmark, where it acquired majority control of the country's second largest mobile service provider, Sonofon, for DKK 14.7 billion ($1.9 billion). The company also entered Thailand, acquiring a 30 percent stake in TAC/UCOM. These purchases came on top of Telenor's entry into Malaysia, where it had purchased a 33 percent stake in the country's DiGi mobile network in 1999.

Telenor began restructuring its holdings in 2001, selling off its minority stakes in Germany and Ireland, as well as its position in Northwest GSM. Telenor also sold off a number of noncore holdings, such as its Telenor Media directories busi-

2002–2004

A turning point in Telenor's conversion from government body to publicly held company came in 2002, when Telenor opened its new headquarters. Where the former Telenor's offices had been scattered among some 35 sites throughout Oslo, the new headquarters brought more than 6,000 of the company's employees together into a single site. The move to new headquarters coincided with the naming of Jon Fredrik Baksaas as the company's CEO.

After acquiring a majority stake in Ukraine's Kyivstar in 2002, Telenor returned to its home region, acquiring struggling Swedish telecom group Utfors for SEK 264 million ($30 million). The following year, Telenor took full control of Sonofon, buying out the stake held by BellSouth. The company also returned to Russia, now acquiring a stake in VimpelCom, the country's number two mobile telephone company. By 2004, Telenor's stake in VimpelCom had increased to 29 percent.

Telenor's expansion continued into 2004, with the formation of the Starmap alliance with nine mobile service providers in Europe. The company also won a license to introduce GSM-based services in Pakistan that year. At home, the company acquired the Norwegian Internet operations of Italy's Tiscali, then bought up the Swedish Internet group Spray's corporate Internet customers at the end of the year. Telenor closed out 2004 with the purchase of an additional stake in GrameenPhone, boosting its position to 62 percent of the Bangladesh operator. Telenor had successfully transformed itself from a single-country monopoly into a fast-growing global mobile telecommunications group.