HELSINKI, Finland-Following discussions with senior government ministers in Denmark, the Brussels, Belgium-based European Investment Bank (EIB) has drafted a proposal to loan Danish mobile operator TDC Mobile US$200 million to complete and launch its third-generation (3G) network and services in Denmark.
The loan amount being offered by the EIB represents some 20 percent of the total projected capital cost of TDC Mobile’s 3G rollout, which is estimated to cost in excess of US$1 billion.
Denmark has been identified by the European Union (EU), the International Telecommunication Union (ITU) and the EIB as one of the European countries “most susceptible” to 3G penetration, because of high levels of mobile and Internet use, and close proximity to Germany, Europe’s largest telecom market.
According to TDC, the proposed investment could assist in covering the cost of upgrading and expanding capacity within TDC Mobile’s GSM/General Packet Radio Service (GPRS) network, as well as for 3G launch preparations.
The Danish government, which holds the presidency of the European Union until 31 December, is keen to negotiate special funding terms on behalf of the EU’s “small nation economies.”
The rationale for this approach is a growing awareness among Danish, Swedish, Finnish, Belgian, Dutch and Irish governments that the EU’s stringent regulation of the telecom sector will make it increasingly difficult for mobile operators operating in small markets to produce a satisfactory annual profit, forcing many to reduce prices to levels that are financially unsustainable.
“We have already reached the pricing levels required by regulators. Now it is time to abolish unproductive regulations. Continued regulation will make it increasingly difficult for telecom companies to survive. It will hurt competition and overthrow the entire political vision in Denmark that this country can be the best and cheapest when it comes to mobile and 3G telecommunications,” said TDC President Peder Andreasen.
In TDC’s case, Danish regulators require that the company reduce its landline end-user prices by 4 percent a year in real terms. This produces a shrinking profit margin for TDC and leaves the company with less to invest in 3G-related investments.
“If TDC was allowed to set its own prices and implement sustainable business models, we could make investments that would make Denmark a leading telecoms and 3G nation. The broadband area within ADSL is a good example of how this could be done with regulatory interference,” said Andreasen.
