Tele2 - Take a turn to the East?

One of my favourite areas of interest is the shenanigans surrounding the Russian/CIS telecoms space. It is fascinating as a study not only in a maturing cellular market across a vast geographical area, but only a study in an emerging capitalist society.

Currently Tele2 seems to have abandoned its’ pursuit of fixed-line expansion in mainland Western Europe and must also be struggling with its’ CPS based fixed line business, given the shift towards broadband ULL and the recent exits from the UK & Czech Republic. The new strategy seems to be building a 4^th cellular network in Russia. The rumoured acquisitions follows on from a string of acquisitions during 2006. I much prefer this apparent change in strategy as it should be aware to all by now I’m no fan of the economics for MVNO and CPS providers, ULL is a totally different ball-game which I’m neutral on at the moment.

The Russian strategy although politically risky could present big rewards as a cellular market the size of Russia can easily support 4 operators. I would recommend against taking a local partner as their Scandinavian friends at Telenor and Teliasonera will verify. The key move that Tele2 will have to take soon is the acquisition of a licence in Moscow itself if the strategy is to bear fruit. I wait with interest further comments on Tele2’s change of strategy in its’ forthcoming Q2 results.

Tele2 has an extremely interesting history and is know for its’ disruptive power in markets across Europe. It may turn out to be even more famous for the incubation of two of the great disrupters of our time.

Tele2 is controlled by the AB Kinnevik group, which in turn is controlled by the Stenbeck family, which suffered a great loss with the demise of the driving force behind expansion into Telecoms when Jan Stenbeck died in 2002, control seems to have passed to his daughter Cristina. I have long suspected a change of focus within the group and a possible exit from telecoms altogether. The Emerging World mobile arm, Millicom, has recently been auctioned off with the Vodafone’s Chinese partner emerging as the surprise winner. I must admit to wondering whether the Russian venture is an attempt to bulk up value before a sale or an indicator of a long term commitment.

Tele2 is definitely a company worth keeping an eye on.