In February we wrote about the Norwegian “satellite shadow network” where one billion kroner worth of network yielded 5 200 customers. A similar story has been uncovered in Sweden except the yield was one Swedish krona.
The Swedish state-owned company Teracom operates a distribution network for Radio and TV services that covers 99,8% of Swedish households. It’s a nice little earner – the 2008 net profit margin was 20% on revenues of around SEK 3 billion. But some ten years ago the company decided to build a DSL network in 49 Swedish counties with 600 000 homes passed. And that, as this article shows, was not a spectacular success.
The company secured more than €100 million in public financing from the state, the EU and local authorities. In addition, the company invested €40 million, so that the entire network cost almost €150 million. Last September, Teracom decided to sell the network and some 40,000 customers. The selling price? One Swedish krona. Or ten eurocent, if you wish.
Here’s what I think about it:
* Investors no longer value DSL networks (at least not in the Nordic countries). Although the Teracom DSL network valuation is rather extreme, other DSL networks have not been treated well in recent transactions: When Tele2 sold their Norwegian DSL network to Telia last year, the price was around €150 per customer.
* Customers no longer value DSL networks. At least not when we’re talking residential customers and they’re offered FTTH or HFC-based Internet Access. As these operators continue to upgrade the available speeds customers are likely to migrate away from DSL networks. And in a couple of years even more DSL customers are likely to migrate to new mobile networks when they can offer meaningful and consistent speeds of 10 Mbit/s or so.