There has always been a difficult balance to strike for regulators, between expanding competition and ensuring that operators are sufficiently financially stable and spectrum-rich to be viable. This has got far worse in LTE, because to deliver the full performance of 4G, carriers need to be able to deploy in wide channels, plus they are trying to build up more capacity for the data explosion and for the rising number of MVNOs in many countries.
That means that operators, old or new, need to be sure they can win sufficient spectrum to achieve a profit model – otherwise they will either never launch viable services, wasting the frequencies, or they will be forced into acquisition by larger players.
This is being seen in various European markets where smaller cellcos have been able to bid at auction, but claim they have insufficient capacity to be competitive. Denmark is a country where consolidation is expected, with TeliaSonera said to be interested in bidding for 3 Denmark. While 3's parent, Hutchison Whampoa, is thought to be open to offers as Danish competition mounts, it will want to recoup the estimated $1.2 billion it has invested in the subsidiary. But local analysts think that would be “way too expensive.”
TeliaSonera CEO Lars Nyberg said recently: "I always buy if it is the right price.” He added: “We are not going to leave Denmark, but we have concerns in Denmark. It is a very difficult market, that much is certain. No one is making real money in Denmark.” The Danish situation highlights how hard it is for operators like 3, which has no 2G spectrum to refarm in its various territories, to secure sufficient frequencies for true mobile broadband.
The market has become too fragmented and will have to consolidate, argue many parties. Nyberg commented in a recent interview: "The regulators were given the task many years ago to make sure there was sufficient competition and they have interpreted that as meaning that the more operators there are, the better. I am not sure that is the whole answer. If you look at all the third biggest and fourth biggest operators, they are not making any money.”