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Tele2 sells UK, Irish operations to Carphone Warehouse

Blames Ofcom

Swedish telecommunications operator Tele2 has sold its operations in the UK and Ireland to Carphone Warehouse for £8.7 million, Tele2 said today. Tele2 has 223,000 customers in those markets.

Tele2 blames the UK regulator for its decision to exit the markets.

"It's important that you have a local regulator to push the incumbents and from that perspective it's taken longer in the UK compared to other countries," said Hakan Zadler, Tele2's chief financial officer.

Tele2 is leaving the Irish market at the same time because without the UK presence the company can't continue to leverage common branding efforts.

Ofcom, the UK regulator, isn't acting as fast as it could in ensuring that operators are fairly opening their networks to competitors like Tele2, or ensuring that wholesale rates are fair, said Katja Ruud, a research director at Gartner. But there are other factors for Tele2 in the UK as well, she said.

"Tele2 was also very late to the market in the UK, which is littered with competitors on the fixed voice side," Ruud said. "They would have struggled from the beginning." Tele2 has a very strict business model and will exit markets if its goals aren't met, she said. Earlier this year Tele2 pulled out of Finland.

The decision to sell its businesses in the UK and Ireland began several months ago when Tele2 considered entering the broadband market in the UK, Zadler said. "Our view was that we needed to do something in broadband otherwise it would not be worth continuing operations there," he said. "When we looked at the cost for that and also again having our view on the competition in the UK and the deregulation process, we didn't think it was worth it."

Carphone Warehouse already offers fixed-line voice services in the UK and is, in essence, buying Tele2's customers. "Carphone Warehouse has a longer presence [in the UK] and they are much more of a household name," Ruud said. The company is already competing strongly with BT, the incumbent, she said.

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