Teliasonera has boosted its presence in Norway by snapping up Tele2’s subsidiary in the country, but the deal has only highlighted a "miserable and failed" spectrum licencing process, according to one analyst.

The transaction will increase TeliaSonera’s mobile market share in Norway to approximately 40 percent from 23 percent while the mobile subscription base will increase to 2.7 million from 1.6 million.

It remains the second largest player behind incumbent Telenor but well ahead of the third player Access Industries, which was a surpise winner at the country's spectrum auction last December.

As part of the deal, TeliaSonera has promised to accelerate the 4G roll-out to reach 98 percent population coverage by 2016 instead of 2018.

Overall, the operator said the acqusition is estimated to incur integration costs of between €20-40 million and investments of €30 million to handle the increased traffic.

However, from 2016 it expects to make annual costs savings of “at least” €68 million.

TeliaSonera already operates under the brand names NetCom and Chess in Norway.

President and CEO Johan Dennelind commented: “I am delighted that we have reached an agreement to acquire Tele2 in Norway. This is a great strategic fit for TeliaSonera and in line with our ambition to strengthen our position in our core markets.”

August Baumann, Head of NetCom added: “The greater scale will improve our competitiveness and ability to offer mobile internet services to enterprise customers and consumers in the entire country, including the rural areas where large investments are needed.”

The acquisition is subject to approval from the Norwegian Competition Authorities and is expected to be finalised by the end of Q1 next year.

The two companies said they are confident that all relevant regulatory approvals will be obtained.

However, IHS Technology Analyst Peter Boyland believes the combined TeliaSonera/Tele2 entity may  be expected to divest some of its spectrum holdings, which was made a key obligation of the recent mergers in Germany and Ireland.

He added: "If [Access Industries owner] Telco Data were to reveal its launch plans, this would encourage the regulator to approve TeliaSonera’s buyout of Tele2 since it would increase their confidence this third network operator will deliver a healthy level of competition.

"While Telco Data has yet to show its hand, the regulator may take a view that its expected launch will be enough to sustain competition and choice in the market."

Tele2 announced in March that it was putting the subsidiary up for sale after it failed to win spectrum at an auction of 800, 900 and 1800 MHz frequency bands.

[Read more: Norwegian regulator reveals spectrum auction brings in €211 million]

Bengt Nordström, CEO of the Northstream consultancy, said the deal was “the predictable result of a pretty miserable and failed spectrum licencing process”.

He added: “Norway now essentially has two strong operators, plus a very small outfit with lots of spectrum, little infrastructure and few customers.

“It seems like a good deal for TeliaSonera, and Tele2 shareholders will get decent returns. But it’s a timely reminder for the mobile industry that poor regulatory decisions can create uncertainty that makes a mockery of huge infrastructure investments.”

Last week, the Norweigan regulator announced plans to auction off three blocks of unsold mobile spectrum in the 1,800 MHz band in early 2015.

Tele2 President and CEO Mats Granryd commented: “Whilst we have not been able to complete our originally desired strategy, the proposed deal is good for our customers, shareholders and for Tele2 as a whole.

“This is an attractive transaction at a good valuation and it enhances our opportunities to challenge and take new steps on other markets.”

In April, Tele2 said it will focus on its businesses in the Netherlands and Kazakhstan this year as it looks to stem falling revenues across the group.

It said it is too early to say how it would spend the money.

A statement read: “Tele2 will update the market in due course and remain committed to maintain its mid-term objective of delivering a return of capital employed of around 20 percent and a progressive dividend policy.”

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