Swedcom closes 2-yr contract with NSN, eyes MVNO license

Tuesday, May 20, 2008

Chilean wireless solutions provider Swedcom has closed a US$3.5mn, two-year services deal with infrastructure provider Nokia Siemens Networks (NSN) in Chile and is negotiating with other vendors to replicate the deal elsewhere in Latin America, Swedcom general manager and director Wuilian Salamanca told BNamericas.

The contract will involve 25 Swedcom consultants and engineers, dealing mainly with benchmarking services and quality control through network test drive systems.

Swedcom acts as an in-country partner for international telecoms infrastructure companies such as NSN, Ericsson (Nasdaq: ERIC) and Huawei, as well as working directly with operators. Salamanca estimates that 55% of Swedcom's revenues come from suppliers, while the remaining 45% comes from operators such as América Móvil's (NYSE: AMX, Nasdaq: AMOV) Claro units, Telefónica's (NYSE: TEF) Movistar units, Entel Chile, Oi (NYSE: TNE) and Vivo (NYSE: VIV).

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However, the company is positioning itself to provide new services directly to end-users and enterprises, and therefore has applied for an MVNO license in Chile. The idea is to resell wireless data services, mainly based on 3G networks.

Swedcom has completed a crucial phase in the license application process by successfully passing through a period in which third parties are entitled to present objections to the application. The company now expects the government to issue a decree for the final seal of approval on the license within the next two months.

There are 12 other licensed MVNOs in Chile, but according to Salamanca they lack a partner to help them negotiate service resale terms with established mass-market operators. Swedcom aims to function as that partner, effectively an MVNE (mobile virtual network enabler). The company believes there is no conflict of interests because the MVNO and MVNE units will be completely separate companies. One will work for the end user in a very niche-specific way, and the other will focus on relationships between MNOs and MVNOs.

Salamanca does not expect any of Chile's licensed MVNOs to be ready to start commercial operations this year.

To maximize its positioning as a MVNE, Swedcom has hired engineers and consultants, including MVNE experts from overseas, particularly Europe, who will guide the firm's technical and commercial implementations.

On the basis of its service contracts around the region with international equipment suppliers, Swedcom believes it will have an international platform over which it could replicate its MVNO/MVNE model.

Salamanca recently told BNamericas that Swedcom expects 50% revenue growth this year compared to 2007, bringing in a total of US$9.2mn. The executive also said that he expects half of this year's revenues to come from Brazil and Argentina. Swedcom also confirmed that it is on track for closure of an agreement to provide services for Brazilian mobile operator Oi.

Swedcom now has contracts worth a total of US$3.5mn in Brazil through Oi, Vivo and Claro Brasil, mainly dealing with in-building network services so that the operators have better coverage in enclosed spaces that are open to the public, such as hospitals, malls, subway stations and conference halls.

Due to Swedcom executives' extensive experience in the Latin American telecoms sector, the company has a strong network of engineering associates and can readily accept additional contracts in any country. The firm had approximately 60 engineers working on projects in 2007 and expects to hire at least 15 more this year just in Brazil.

Salamanca believes the region is primed for strong growth of integrated consulting services since the few local and international suppliers that provide similar services are either too local or tend to specialize in a single service area, such as implementation. Swedcom's services span the full range, including design optimization and planning for 2G and 3G networks, service quality verification through benchmarking and test drive services, equipment supply, implementation and assistance in negotiating site acquisitions for operators.

The executive stressed the importance of benchmarking by an independent party to decide which MNO would be the best partner for a MVNO. He added that price and revenue sharing agreements alone cannot be the deciding factors. The selection depends on the MVNO''s business plan, whether voice or data. In addition, it is crucial for prospective MVNOs to be sure that the services they will be reselling are proven to meet consumers' expectations.