* Deal follows Tele2 loss in mobile spectrum auction
* TeliaSonera sees savings of SEK 800 mln per year
* Norway regulator expected to ask for concessions
* Regulatory approval seen in Q1 2015 at the latest (Adds detail, context, analyst)
By Sven Nordenstam and Leila Abboud
STOCKHOLM, July 7 Sweden's Tele2 has agreed to sell its Norwegian mobile telecoms business to rival TeliaSonera for 5.1 billion Swedish crowns ($744 million), in a deal that will test the resolve of competition regulators amid a wave of telecoms industry consolidation.
The sale follows Tele2's loss in December of an auction of key mobile frequencies that it needed to power its Norwegian mobile network of some 2,000 antennas, leaving it without a clear way forward in its third-biggest market.
Norway will now be left with two established mobile network operators - TeliaSonera and market leader Telenor - plus new entrant Access Industries, which trumped Tele2 in last year's spectrum auction.
If they approve the sale, Norwegian regulators are likely to ask TeliaSonera for concessions to prevent a duopoly and protect consumers. That could include selling Tele2's entire mobile network, analysts said, leaving TeliaSonera with Tele2's subscriber base.
"We are convinced that this is a deal that we can bring to a closing, otherwise we would not have announced it," TeliaSonera Chief Executive Johan Dennelind said on a conference call.
He declined to say what concessions TeliaSonera would offer to regulators. In a move to show that the deal would be good for consumers, TeliaSonera pledged to accelerate the rollout of super-fast 4G mobile technology in Norway so that 98 percent of the population was covered by 2016 instead of 2018.
Industry consultant John Strand said regulators may ask TeliaSonera to sell one or more of Tele2's mobile brands or rent network capacity to smaller rivals that lack their own networks.
"The Norway competition regulator is no pushover," said Strand. "Getting approval for this case will not be a walk in the park."
TeliaSonera shares rose 2 percent to 50.65 Swedish crowns, while Tele2 was up 2 percent to 83 crowns at 1029 GMT. Telenor gained 2 percent to 143.3 Norwegian kroner.
If the deal were blocked, TeliaSonera would pay an undisclosed break-up fee to Tele2 and carry Tele2's mobile traffic for two and a half years under a roaming agreement.
Success would help TeliaSonera bolster its position in its fourth-biggest market, where it has been losing customers to Tele2 and Telenor.
TeliaSonera's mobile market share would climb to 40 percent from 23 percent, giving it 2.7 million customers compared with Telenor's 3.2 million.
TeliaSonera said the acquisition would lead to cost savings of at least 800 million crowns per year from 2016, largely from transferring traffic from Tele2's network to its own.
The companies said they expected the deal to close in the first quarter of next year at the latest.
TELE2 PONDERS NEXT MOVE
For Tele2, the sale would bring a capital gain of around 2 billion crowns. The company had been banking on growth in Norway along with the Netherlands and Kazakhstan after exiting Russia last year. It said it was too early to say what it would do with the money raised from the Norwegian sale, but that it was unlikely to enter new markets.
Norway's newest telecom player Access, which is backed by Ukrainian-American billionaire Len Blavatnik who also owns Warner Music Group, could benefit from the Tele2 deal since the regulator may force TeliaSonera to sell Tele2's mobile network.
Access, which operates a small mobile broadband company called ice.net with roughly 200,000 customers, would be the logical buyer since Tele2's network would quickly turn it into a real player in Norway.
Tele2 Norway had sales of 4.1 billion Swedish crowns in 2013 and core earnings (EBITDA) of 121 million crowns.
The deal is the latest in a flurry of M&A activity in Europe's telecom sector as operators seek to bulk up to cope with falling revenues and tough competition.
Europe's antitrust watchdog last week cleared Telefonica's 8.6 billion euro purchase of KPN's E-Plus, a smaller mobile rival in Germany. In May, Hutchison took the Ireland market from four to three by buying out Telefonica's local unit.
In both cases, the regulator required the buyer to rent out capacity on its network to smaller rivals that do not own their own networks, in an effort to maintain competition and prevent price rises after the deals. ($1 = 6.8553 Swedish kronas) (Reporting by Sven Nordenstam; editing by Matt Driskill and Tom Pfeiffer)