UPDATE 1-Telenor expands in Sweden with Tele2 cable deal

Wed Oct 23, 2013 9:18am EDT

* Deal makes Telenor second-biggest consumer broadband operator in Sweden

* Sale allows Tele2 to focus on mobile services (Adds comments by companies, further details, background)

By Sven Nordenstam

STOCKHOLM, Oct 23 (Reuters) - Norway-based international telecoms group Telenor has agreed to buy Tele2's consumer fibre and cable business in Sweden in a $122 million deal that will make Telenor the second-biggest broadband supplier in Sweden.

The move comes as telecoms companies across Europe vie to offer packages of cable television, broadband Internet, fixed-line and mobile telecoms services.

Earlier this month Liberty Global, Europe's biggest cable operator, made an approach to buy Dutch firm Ziggo , having already bought Britain's Virgin Media for nearly $16 billion in February.

It also bid for Germany's largest cable group Kabel Deutschland but lost out to British mobile giant Vodafone .

Vodafone has also been acquiring and developing cable assets in other European markets such as Spain and according to media reports was recently eyeing Italian cable operator Fastweb, although its owner, Swisscom, has said it is not interested in selling.

Telenor is paying 775 million Swedish crowns ($122 million) in cash and taking over 68 employees from Tele2, the companies said on Wednesday.

Tele2, which sold similar businesses in Norway and Lithuania in 2009 and 2010, said the sale would leave it to focus on mobile services and invest more in its mobile networks. The deal does not include its fibre infrastructure or customers on the business side.

The consumer business had an estimated market share of 6 percent for broadband services in Sweden as of March 31 this year, according to Telenor.

That made it a distant number four, behind TeliaSonera with a 37 percent market share, private equity-owned ComHem with 19 percent, and Telenor with 18 percent.

Tele2 spokeswoman Pernilla Oldmark said the business was sold as Tele2 lacked the scale needed on the consumer side to make it profitable.

Conversely Telenor said the business, which includes a portfolio of about 370,000 households provided with a mix of broadband and TV services had sales of 530 million crowns last year and would significantly strengthen its position as a provider of fixed broadband and television.

"This topic is a priority for us and our new customers and employees will play a vital role in our business going forward," Lars-Ake Norling, chief executive of Telenor Sweden, said in a statement.

Shares in Telenor were up 0.53 percent at 150.60 Norwegian crowns by 1314 GMT, when Tele2 was up 1.3 percent at 76.60 Swedish crowns and TeliaSonera was down 0.5 percent at 52.60 crowns. ($1=6.3715 Swedish crowns) (Editing by Greg Mahlich)

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