EUROPEAN VOIP RESEARCH SERVICE SWEDEN




Sweden
Market Trends
Service providers first introduced VoIP to Sweden in 2002, ...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 1
VoIP Subscribers and Growth, Q4 2004 – Q4 2008




  Notes: Data primar...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 2
VoIP Subscribers by Access Type, Q4 2004 – Q4 2008




  Notes: Data in...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 3
VoIP Subscribers by Provider, Q4 2004 – Q4 2008




  Notes: Data prima...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN



Telia’s triple-play bundles with VoIP start at €27.00 (SEK 299) for 2 Mbps and 6 ...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN



are small local ISPs that specialize in offering broadband Internet access via fi...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 6
Broadband Subscribers by Access Type, Q4 2004 – Q4 2008




  Notes: Da...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 7
Fixed Line Losses versus VoIP Subscriber Gains, Q1 2005 –
Q4 2008




 ...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 8
Residential Voice Subscribers: VoIP versus Fixed Lines, 2005
– 2013



...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




FIGURE 9
VoIP and Broadband Subscriber Forecasts, Q4 2004 – Q4
2013




  Notes:...
EUROPEAN VOIP RESEARCH SERVICE SWEDEN




The content on the preceding pages is a section from TeleGeography’s European Vo...
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Sweden

  1. 1. EUROPEAN VOIP RESEARCH SERVICE SWEDEN Sweden Market Trends Service providers first introduced VoIP to Sweden in 2002, but it wasn’t until 2005 that VoIP services gained broad acceptance. VoIP subscriber numbers continue to grow, but at a slower rate than 2007. VoIP increased 18 percent in 2008, from 623,000 to 735,000, compared to 52 percent the previous year. Residential subscribers dominate the market, accounting for over 96 percent of the VoIP lines in service. Approximately 17 percent of Swedish households subscribe to an IP telephony service. 1
  2. 2. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 1 VoIP Subscribers and Growth, Q4 2004 – Q4 2008 Notes: Data primarily comprised of residential subscribers, but may include some business subscribers. Data does not include computer-based VoIP users. Source: TeleGeography research © 2008 PriMetrica, Inc. VoIP gained its initial foothold in Sweden by running over Ethernet LANs in multi- occupancy buildings, rather than over DSL or cable, as in most other European countries (see Figure: VoIP Access Type, Q4 2002 – Q4 2008). Not until 2005 did VoIP over DSL—and later VoIP over cable—begin to take off. Since then, cable operators have managed to capture the majority of the market: 44 percent of consumer VoIP subscribers receive their service from cable providers, while 27 percent receive service from DSL providers. 2
  3. 3. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 2 VoIP Subscribers by Access Type, Q4 2004 – Q4 2008 Notes: Data includes residential and business subscribers. Source: PTS and TeleGeography © 2008 PriMetrica, Inc. Research Service Providers Although more than 60 operators offered consumer VoIP services in Sweden, just two companies, Com Hem and Telenor Sweden, accounted for 73 percent of the lines in service. Cable company Com Hem began offering VoIP as part of a triple-play service bundle in October 2004 and gained subscribers rapidly. In June 2006, Com Hem acquired rival cable provider UPC Sweden, to become the largest cable operator in the country. Com Hem overtook Telenor’s Bredbandsbolaget subsidiary as the VoIP market leader in late 2006. Com Hem’s VoIP subscriber base increased 20 percent, from 261,000 to 314,000 in 2008. Bredbandsbolaget began offering VoIP services over Ethernet LANs in multi-occupancy buildings in early 2003. Bredbandsbolaget was acquired by Norwegian incumbent Telenor in July 2005. Telenor has since acquired two other broadband providers, GlocalNet and Spray, and is now both the second largest broadband ISP and VoIP service provider in Sweden. Telenor Sweden had 620,000 broadband subscribers and 224,000 VoIP subscribers at year-end 2008, up 11 percent from year-end 2007. Telenor also has 214,000 PSTN subscribers in Sweden at year-end 2008. Like many other European incumbents, TeliaSonera has been reluctant to compete aggressively in the domestic VoIP services market for fear of undermining its traditional telephony service. TeliaSonera introduced consumer VoIP service in June 2007 as a component in triple-play bundles. The company initially offered the service to 2.4 million households, approximately half of the homes in Sweden. 3
  4. 4. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 3 VoIP Subscribers by Provider, Q4 2004 – Q4 2008 Notes: Data primarily comprised of residential subscribers, but may include some business subscribers. Data does not include computer-based VoIP users. Source: TeleGeography research © 2008 PriMetrica, Inc. Pricing Com Hem and Tele2 offer IP telephony service both as a stand-alone service and as a component in a package of bundled services. Com Hem offers unique pricing for its triple- play bundle: subscribe to any three services and get the cheapest one for free. This usually means that telephone service is included in a bundle at no incremental cost. A standard triple-play service with 9 cable channels and 2 Mbps internet service costs €24.20 (268 SEK). Customers may add unlimited calls to domestic fixed lines for an additional charge of €4.40 (SEK 49). Tele2 includes broadband telephony at no extra monthly charge with its triple-play package starting at €17.90 (198 SEK), though customers must spend a minimum of €6.20 (69 SEK) in calling costs per month. Customers may choose an optional unlimited national calling plan for €5.90 (65 SEK). Telenor provides VoIP service over both DSL and Ethernet LANs, and only offers VoIP service in connection with a broadband subscription. The price of VoIP in a dual-play package depends on the type of Internet access selected. For subscribers to Telenor’s 2 Mbps service, VoIP service costs €6.20 (69 SEK) per month. Lower VoIP prices apply to subscribers choosing higher speed (and higher priced) broadband services. For example, subscribers choosing 24 Mbps DSL or 100 Mbps LAN service pay receive the voice service at no additional cost. Telenor’s standard triple-play service over LAN starts at €34.30 (379 SEK) for 2 Mbps Internet service and standard cable channels. The same bundle over DSL starts at €41.30 (457 SEK). Customers may choose an optional unlimited national calling plan for €5.20 (58 SEK). 4
  5. 5. EUROPEAN VOIP RESEARCH SERVICE SWEDEN Telia’s triple-play bundles with VoIP start at €27.00 (SEK 299) for 2 Mbps and 6 IPTV channels. Customers may add unlimited calls to domestic fixed lines for an additional charge of €5.90 (SEK 65). Addressable Markets Broadband Market Broadband subscribers in Sweden increased 2.7 percent in 2008 to 2.8 million, equivalent to 67 percent of households. At year-end 2008, DSL was the dominant broadband access technology with 1.56 million broadband lines in service, equivalent to 56 percent of broadband subscribers. LAN service providers had 566,000 customers (20 percent of broadband subscribers) while cable operators had 561,000 subscribers. FIGURE 4 Addressable Market Indicators, Q4 2006 – Q4 2008 Indicator Q4 06 Q107 Q207 Q307 Q4 07 Q1 08 Q208 Q308 Q4 08 VoIP Subscribers 409,773 455,728 501,683 562,342 623,000 639,500 656,000 695,500 735,000 VoIP Traffic (millions of minutes) 675 757 837 930 1,036 1,104 1,133 1,182 1,251 Residential Switched Subscribers (m) 3.8 3.8 3.7 3.7 3.6 3.5 3.5 3.4 3.3 Total Fixed-Line Subscribers (m) 5.6 5.5 5.5 5.5 5.5 5.5 5.4 5.4 5.3 Broadband Subscribers (m) 2.4 2.5 2.6 2.7 2.8 2.8 2.8 2.8 2.8 Mobile Subscribers (m) 10.3 10.4 10.0 10.2 10.4 10.5 10.8 11.1 11.4 Households (m) 4.4 4.4 4.4 4.4 4.3 4.3 4.3 4.3 4.2 Population (m) 9.0 9.0 9.0 9.0 9.1 9.1 9.1 9.1 9.1 VoIP Subscribers as Percent… … of Total Fixed-Line Subscribers 7% 8% 9% 10% 11% 12% 12% 13% 14% … of Broadband Subscribers 17% 18% 19% 21% 23% 23% 24% 25% 26% … of Households 9% 10% 11% 13% 14% 15% 15% 16% 17% Notes: VoIP subscriber data are primarily comprised of residential subscribers, but may include some business subscribers. Broadband subscriber data include both residential and business subscribers. Fixed-line, mobile, and broadband subscriber data draw from TeleGeography’s GlobalComms Database. Source: TeleGeography Research © 2008 PriMetrica, Inc. Incumbent TeliaSonera continues to lead the broadband market with 1.1 million subscribers in 2008, 40 percent of the market. Telenor Sweden is the leading alternative carrier with 623,000 subscribers, accounting for 21 percent of Swedish broadband subscribers. Cable operator Com Hem reported 512,000 subscribers, or 18 percent of the broadband market at year-end 2008. Tele2 is the fourth largest broadband providers, with 439,000 subscribers, or 15 percent of the market. Fiber-to-the-Home (FTTH) 566,000 Swedish broadband subscribers, accounting for 20 percent of broadband lines, receive service over fiber to the home. Sweden has a large number of ISPs, many of which 5
  6. 6. EUROPEAN VOIP RESEARCH SERVICE SWEDEN are small local ISPs that specialize in offering broadband Internet access via fiber networks in multiple occupancy buildings. The property networks are often linked to area networks, and are based on Ethernet technology with transmission capacity up to 100 Mbps. Not all ISPs that offer LAN are small: Bredbandsbolaget got an early start installing broadband in all HSB Properties, a housing cooperative with over 500,000 members, many of which were multi-occupancy buildings. The company now has 182,000 LAN subscribers, 32 percent of all residential LAN customers in Sweden. FIGURE 5 Broadband Subscriber Retail Market Share, Q4 2008 Notes: Data include residential and business subscribers. Data drawn from TeleGeography’s GlobalComms Database Source: TeleGeography research © 2008 PriMetrica, Inc. Local Loop Unbundling (LLU) Although EU regulations on LLU were adopted in January 2001, unbundled competition in Sweden took considerable time to develop. At the end of 2004, figures from the European Competitive Telecoms Association (ECTA) showed that just 24,000 DSL subscribers received service over unbundled local loops. The PTS’ legal enforcement of TeliaSonera’s commitment to unbundled access, coupled with rapidly rising interest in broadband services, led to a surge in LLU-based services in 2006 and 2007. In 2008, however, TeliaSonera reported a decline in unbundled wholesale copper access lines, from 620,000 a year earlier to 611,000 as competitors increasingly offer services of fiber to the home and cable networks. 6
  7. 7. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 6 Broadband Subscribers by Access Type, Q4 2004 – Q4 2008 Notes: Data include residential and business subscribers. Data draw from TeleGeography’s GlobalComms Database Source: TeleGeography research © 2008 PriMetrica, Inc. Fixed Telephone Market The traditional fixed-line telephone market remained relatively stable between 2002 and 2008, declining only 0.8 to 1.6 percent per year. Over the past three years, the increase of IP-telephony lines has helped offset the drop in PSTN lines. In 2008, there were 5.3 million fixed lines. Switched telephone network operators lost 279,000 residential lines, while VoIP subscribers have gained 117,000 lines. TeliaSonera dominates the fixed-line market with 4 million subscribers, or 75 percent of the market. Tele2 led the competitive carriers with 817,000 subscribers or 15 percent of the market. Com Hem and Telenor round out the top four with 277,000 and 214,000 subscribers respectively. 7
  8. 8. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 7 Fixed Line Losses versus VoIP Subscriber Gains, Q1 2005 – Q4 2008 Notes: VoIP subscriber data are primarily comprised of residential subscribers, but may include some business subscribers. Source: TeleGeography research © 2008 PriMetrica, Inc. Wireless Market Sweden had 11.4 million mobile subscribers at year-end 2008, equivalent to 124 percent of Sweden’s population. After a year of very slow growth, less than one percent in 2007, mobile subscribers surged in 2008 by 9.8 percent. TeliaSonera is the largest mobile operator in Sweden with a 47 percent market share at year-end 2008. Tele2 is the second largest mobile operator in Sweden, with a 29 percent market share. Telenor Sweden (formerly Vodafone) and Hi3G Access Sweden share the remainder of the Swedish market. Outlook At year-end 2008 the Swedish VoIP market ranked, in terms of household penetration, as 5th out of the 13 national markets examined in this report. Moreover, TeleGeography forecasts continued rapid growth for the Swedish residential VoIP market. We currently estimate that the VoIP market will have nearly 1.4 million subscribers by year-end 2013, with the fastest growth occurring during the 2008-2009 period. This growth would drive VoIP penetration from 17 percent of households at year-end 2008 to 35 percent of households by year-end 2013. We anticipate that the majority of new VoIP subscribers initially will use their service to augment their traditional fixed lines, but that by the end of the five-year forecast period, most VoIP subscribers will have replaced their fixed lines entirely (see Figure: Residential Voice Subscribers: VoIP versus Fixed Lines, 2005 – 2013). 8
  9. 9. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 8 Residential Voice Subscribers: VoIP versus Fixed Lines, 2005 – 2013 Notes: VoIP subscriber data are primarily comprised of residential subscribers, but may include some business subscribers. Source: TeleGeography research © 2008 PriMetrica, Inc. These estimates are buoyed by evidence that the broadband market (the most important addressable market for determining potential VoIP subscriber growth) is poised for further growth in Sweden. We estimate that broadband subscribership in Sweden, already at 67 percent household penetration, may exceed 79 percent penetration by the end of 2013 (see Figure: VoIP and Broadband Subscriber Forecasts, Q4 2004 – Q4 2013). 9
  10. 10. EUROPEAN VOIP RESEARCH SERVICE SWEDEN FIGURE 9 VoIP and Broadband Subscriber Forecasts, Q4 2004 – Q4 2013 Notes: VoIP subscriber data are primarily comprised of residential subscribers, but may include some business subscribers. Broadband subscriber data include both residential and business subscribers. Source: TeleGeography research © 2008 PriMetrica, Inc. TeleGeography’s estimates of VoIP subscriber growth are tempered somewhat by the high dependence on mobiles by Swedish consumers. Consumer surveys in other markets have confirmed an intuitive market supposition: the kind of individuals who are most likely to cancel their fixed-line subscriptions in favor of VoIP are also likely to switch off their fixed lines in favor of mobile phones. In other words, VoIP providers compete with mobile operators for potential subscribers. At 1.3 mobile phones per capita, Sweden’s mobile penetration ranks 6th out of the 13 markets surveyed in this study. A higher-than-average percentage of the populace have already rejected fixed lines in favor of mobile-only households, thus reducing the size of VoIP’s addressable market of likely subscribers in Sweden. TeleGeography’s estimates of VoIP subscriber growth are based on a Bass diffusion model. For details, see the discussion of forecast methodology in the “Market Analysis” section. A key assumption underlying the aggressive growth estimates envisaged for the Swedish market is that VoIP will become available to most subscribers as a free or near-free component of triple-play Internet/voice/TV bundles. We have already observed wide adoption of such service packages, for example, in France and are observing its emergence in other countries. Such offerings, generally introduced by broadband competitors to the incumbent, are in part predicated on stringent enforcement of local loop unbundling initiatives. If the wholesale price of ULL increases over time or if LLU is stemmed in some other way, low-cost VoIP subscriptions would likely become far less prevalent. In such a case, PSTN operators will likely retain a higher proportion of subscribers, and some of the price sensitive voice traffic that would have been handled by network based VoIP providers may instead be carried over consumer-run VoIP applications such as Skype. 10
  11. 11. EUROPEAN VOIP RESEARCH SERVICE SWEDEN The content on the preceding pages is a section from TeleGeography’s European VoIP Research Service The work is based on sources believed to be reliable, but the publisher does not warrant the accuracy or completeness of any information for any purpose and is not responsible for any errors or omissions. This work is for the confidential use of subscribers. Neither the whole nor any part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded or otherwise, without prior written consent from PriMetrica, Inc. All rights reserved. © 2008 PriMetrica, Inc. TeleGeography Research. A Division of PriMetrica, Inc. Washington, D.C. / San Diego / Exeter U.S. tel: +1 202 741 0020 / U.K. tel: +44 1392 315567. www.telegeography.com 11

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