4T MD Johan Ragnevad

Sweden is not a typical market when it comes to commerce. Cash transactions account for only three per cent of the economy, compared to nine per cent across the Eurozone and six per cent in the US. Meanwhile, credit card penetration is 98 per cent and mobile payment through premium SMS is thriving, particularly on the public transport network. A wider mobile wallet offering is the next evolutionary step in this advanced payment market, and 4T is the company that is tasked with making it happen.

The company was formed in November 2011 by Telenor, Telia, Tele2 and Hutchison’s 3, after each had spent several years looking at individual and selectively collaborative approaches to the mobile payment space, says 4T MD Johan Ragnevad. They realised, he says, that “if this was going to fly, then everyone needed to be in on it.”

Collaboration seems to be philosophically fundamental to 4T, which will operate under the WyWallet brand, in a way that is not reflected in other mobile wallet JVs. In the UK 3 is not part of the proposal for the Oscar project and, in the US, Sprint is absent from Isis. The Swedish joint venture exists to exploit the potential for mobile wallet but is not intended—as some others are—to create a platform on which the operators will seek to differentiate themselves with competing service layers. “That is not an issue,” Ragnevad says. “Maybe that is a Swedish thing.”

Despite the different size of the four operators—3 had 1.4 million subscribers at the end of 2011 according to Informa’s WCIS Plus, compared to 6.3 million for TeliaSonera—equal voting rights are essential. “That’s the recipe for the success and speed of the company right now,” he says. “Since the company was formed we’ve had a simple structure where all members have equal votes, and it’s majority votes for everything going forward.”

Like other markets, Sweden has had a mobile payment business based on premium SMS (PSMS) for content and ringtones for a decade or more. But it was the adoption of the same mechanism by consumers to pay for public transit tickets that really spurred the operators to the creation of a specialist player.

“Premium SMS for bus and train tickets has just exploded over the last three years,” Ragnevad says. “It is getting stronger and stronger as a trend, and the usage is getting more frequent. That led to a situation where operators’ invoices really changed character.” Linked to this, concerns over greater regulatory restrictions increased their motivation: “The EU payment services directive, as well as new regulatory measures on e-money, got the operators thinking that they didn’t want this kind of regulatory regime superimposed on their communications businesses. It was better to put it into a separate entity.”

Mobile operators’ ability to create such an entity with relative ease is an illustration of their suitability to lead in the mobile payment space, according to Ragnevad. Financial services companies like banks would find it far more difficult to make such a move, he says.

“It is much easier for four operators to agree on how to lift out a mobile payment business that is not core than it is for seven or eight banks to take part of their core business and put it into a separate entity. For all the banks to agree on a definition of the part to be removed would mean the identification of the lowest common denominator, and they’d risk ending up with a very small service. They are not there yet, they are a lot slower than the mobile operators.”

Since the creation of 4T, the JV has been staffed by people on secondment from the parent companies. It is now in the process of recruiting permanent staff, and Ragnevad says that the target headcount is around 25. As he speaks to MCI in mid-March the decision as to whether customer care will be managed in-house or outsourced has yet to be made, so the figure of 25 does not include this function. It is also subject to another unresolved issue; how 4T plans to engage with merchants—particularly the process of signing them up to an ecosystem that will allow for in-store payments.

“Today we are solely focused on the payment provisioning business,” Ragnevad says. “We’re not doing the end-to-end technical solution, the systems integration or application development for third parties. We’re really only focused on the transaction handling, and the whole setup is built on us outsourcing the transaction machine.”

Unresolved issues do not appear to be viewed as obstacles, though. The WyWallet brand will launch in the summer of this year without a solution for in-store purchases, for example; something that is seen as core to most mobile wallet projects. The reason for this is that NFC—the solution of choice for most mobile operators—is not sufficiently advanced in terms of handset and point of sale (PoS) penetration to be deployed at service launch.

Not that 4T is opposed to NFC.  “We understand the urgency,” Ragnevad says “and we strongly believe in NFC—and in NFC using the SIM card. But this will take two to three years.” In the meantime, he says, 4T will have a PoS solution in place within the next 12 months, with the firm considering NFC stickers, QR codes and optical readers that could be used to authenticate PSMS payments. This would be particularly suitable for smaller merchants, he says, because of the lower investment costs involved and because of the limits on how much can be spent in a single PSMS transaction.

Users who download the WyWallet smartphone app—and smartphone penetration in Sweden is upwards of 50 per cent and rising—will be able to make purchases in “the multiple hundreds of Euros,” Ragnevad says. But for PSMS, because the system is less secure, the maximum allowable amounts are significantly lower.

4T will have two principle revenue streams. It will take a commission from merchants on relevant retail revenues and it will take fees from users who sign up to its credit facility. The monthly spending limit on that facility has yet to be set and at the time of the interview, Ragnevad says, “we are in the credit analysis phase for the level of risk we’ll be taking with the credit instrument.”

A third revenue stream will see the firm charging users a single Swedish Krona—around €0.11—for every peer to peer payment that they make.

Users will also be free to use the mobile wallet as a simple extension of their existing debit card. Ragnevad says the banks have been “eager to do business” in enabling this functionality as it has saved them having to develop smartphone applications of their own.

But clearly 4T is also going after some of the banks’ business. “The retailers have really welcomed us a challenger to the dominance of the card and bank industry,” he says. “I don’t want to exaggerate that, because we give the customers a choice, but there is a substitution or conflict situation coming up. I’m really positive about our ability to affect that ecosystem and make payments more cost-efficient for the retailers because that ecosystem is rather stagnant.”

Executives at mobile payment joint ventures like 4T are talking to their opposite numbers a great deal, behind the scenes. There are similar joint ventures in a number of European markets and there is much discussion and advice-swapping around the challenges involved in setting them up and keeping them running. But it is not necessarily going to be easy for international operators to deploy like-for-like services across their footprint, as they do with mobile telephony. Mobile financial services will necessarily have to be defined on a market-by-market basis.

So could 4T be transplanted into new markets, offering a presence to its owners in territories where they lack a communications footprint? “Theoretically it is possible,” says Ragnevad. “We have been asked this question by other European carriers and, as we view the concept right now, there is really nothing that stops us. But it is really too early to say if we would do that.” Operators in other markets would have to make cooperation central to their strategy, he adds: “If we were to enter another market, it would really require the operators in that country to have the same sensibility, to be prepared to cooperate and separate the business from their communications activities.”

The four owners of 4T are planning to replicate the joint venture in other markets where they are already present, though; namely Norway and Denmark. TeliaSonera and Telenor are both present in Denmark and Norway, while Tele2 is in Norway alone. Hutchison’s 3 has a Danish operation and holds a licence to operate in Norway but has yet to launch. Though not as advanced as the Swedish operation, these initiatives are close on its heels, says Ragnevad, adding that he hopes to see the same WyWallet brand rolled out in these markets.

The Swedish implementation will be the primary indicator of this new partnership model, though. It will be measured not only against existing payment paradigms but also against comparable initiatives in other markets. It is refreshing to hear the leader of such a venture conceding that several key elements of the business have yet to be defined, when it is so close to launching—after all, this a is a first for Sweden and one of a wave of firsts for the mobile industry.

“It will be a challenge for us to make this grow, and to make it viable for larger purchases, both on the web and at the point of sale,” Ragnevad says. “But one of the drivers is the belief; sure there is hype in the market, but there is also real belief in the business development potential for mobile payments, and the things we can do with a growing user base of smartphones.”

Telia, Telenor, Tele2 and 3 are planning to replicate their 4T mobile payment joint venture in Norway and Denmark

Swedish operators Telia, Telenor, Tele2 and 3 are planning to replicate their 4T mobile payment joint venture in Norway and Denmark, where some or all of them are present in the market. The four operators launched 4T in November last year, each owning an equal share in the business. Johan Ragnevad, acting managing director of 4T told Telecoms.com that “there are similar projects between our owners for Norway and Denmark that have not yet come as fas as Sweden. But they are close”.

TeliaSonera and Telenor are both present in Denmark and Norway, while Tele2 is in Norway alone. Hutchison’s 3 has a Danish operation and holds a licence to operate in Norway but has yet to launch.

4T is set to launch commercially in Sweden – under the WyWallet brand – in the summer of this year. Ragnevad cited the high penetration of premium SMS for the purchase of public transport ticketing as one of the reasons why Sweden is well primed for a mobile wallet offering.He added that the firm “hoped” to see the same brand used in Denmark and Norway.

He added that 4T has received a number of enquiries from players in other European markets, but said it was unlikely that the quartet of carriers would look to export their model to markets where they don’t have a presence in the short term.

“Theoretically it is possible and there is nothing to stop us. But if we were to enter another market it would require that the operators there had the same sensibilities in terms of the business, and were prepared to cooperate and separate the business from their existing communications business, as we have done in Sweden.”

Is an m-payments monopoly OK in one market but not in another?

Sweden’s mobile operators are the latest carriers to band together and form a mobile payments joint venture. Investment amounts have not been revealed, but Telia, Tele2, Telenor and 3 will each own 25 per cent of the new operation.

There are no details yet on the payment system to be used, although it should be noted that Telia already has an m-payments platform in place supplied by Accumulate—which supports person to person and person to machine payments.

It also remains to be seen how Hutchison-owned 3’s Swedish strategy sits with the rest of the group. In the UK, 3 is taking a complaint against rivals O2, Vodafone and Everything Everywhere to antitrust authorities after the three operators proposed an m-commerce joint venture not involving 3 UK.

Last week, when telecoms.com spoke to Stephen Lerner, regulatory director of 3 UK, he called the UK initiative: “A cosy collaboration that would control nearly all mobile wallets in the UK and control and sell advertisers and card issuers’ access to its mobile subscribers. This is anti-competitive and akin to a joint selling arrangement which creates a monopoly in several markets, including mobile push advertising and mobile payments, and should not be approved under any circumstances.”

“It threatens to shunt the future of m-commerce onto the wrong track from the start. If allowed to proceed, the JV will damage the prospects of competition in the UK mobile market and the interests of UK mobile consumers,” Lerner said.

We have contacted 3 to get comment on the Swedish developments, and whether or not the Swedish venture constitutes a similarly anti-competitive move, but have yet to hear back.

In related news, m-payment provider PaymentOne has unveiled a mobile SDK with an Android One Click API embedded, allowing developers to monetise their Android apps.

“The toughest challenge any developer faces is how to make money from their apps,” said Brad Singer, executive vice president of PaymentOne. “Freemium is a great business model to engage consumers, and we enable developers to remove all friction at the point of purchase while maintaining a highly secure transaction. In a world where every connected device is ‘commerce ready,’ PaymentOne’s SDKs continue to optimize the payment process for the specific device, platform, media and user experience.”

The move to “remove friction from point of purchase” has resulted in a trend for developers to create initially free apps that rely on in app purchases of virtual items or the unlocking of new features. Carrier billing functionality also provided by PaymentOne is proving to take the sting out of transactions by removing the need for a credit card and instead billing the user’s mobile account.

Sweden’s PTS is auctioning licences for the 1800MHz band

The Swedish Post and Telecom Agency (PTS) will begin a spectrum auction on Wednesday to award block licences for use of the country’s 1800MHz band.

The auction will assign two blocks of 35MHz of spectrum. Within the band there are also existing licensees who hold a total of two 35MHz blocks between them; Tele2, Telenor and TeliaSonera. Those operators are permitted to bid for the blocks being currently auctioned, and as the frequency is technology and service neutral, operators can use it for 3G or for 4G LTE services, according to a PTS spokesperson,

The auction will be held in two stages.  During the first stage, the auction’s 2×35MHz will be split between auction participants. Both new stakeholders and existing licence holders in the 1800MHz band can take part.

Placement in the band will be determined during the second stage. Winning bidders from the first stage can then participate, as can licence holders that already have a licence in the band, meaning that this placement round comprises 2×70MHz.

The PTS has guaranteed that all licence holders in the band will get consecutive spectrum. It has also proposed that 2x5MHz in the band shall be exempt from a licence obligation; this means that these frequencies can be used by anyone without the need for a licence from PTS, reducing barriers to entry.

Ericsson has demoed an LTE Advanced network running ten times the speed of standard LTE

While many countries LTE plans are still at the drawing board stage the ever eager Swedish are already getting a taste of its successor, LTE Advanced. This week Ericsson demonstrated LTE Advanced running over a test network in Kista, Sweden.

The test was performed using frequencies provided by the Swedish regulator the Post and Telecom Agency (PTS) and was used to demonstrate LTE Advanced capabilities such as extended multiple-input, multiple-output (MIMO) and carrier aggregation, which saw three blocks of 20MHz combined in an LTE environment for the first time. The result, Ericsson said, was speeds some ten times faster than Swedish consumers currently enjoy from current commercial LTE services.

Urban Landmark, head of spectrum department of the PTS, said in a statement; “Sweden is in the forefront when it comes to usage of mobile broadband. Sweden was both early with licensing of harmonized spectrum in the 2.6GHz and 800MHz bands, and the first country in the world where LTE was commercially deployed. The demonstration today indicates that mobile broadband technologies continue to evolve rapidly.”

Ericsson said that it expects commercial deployment of LTE Advanced in Sweden as soon as 2013.

“The next step of LTE enhances the current service offering, performance and data speed even further. It provides operators with the opportunity to capitalize further on their existing infrastructure. Once again, Ericsson is committed to supporting operators’ needs as expectations and requirements for mobile broadband services increase,” said Ulf Ewaldsson, Ericsson’s vice president and head of product area radio.

Ericsson said that the demo was made using its current commercial multi-mode, multi-standard, RBS 6000 radio base station and fully complied with 3GPP’s Release 10 global standard for LTE.  Live traffic was streamed between the RBS and a moving van from which network performance could be monitored. In the demonstration, 60MHz of aggregated bandwidth was used, and 8×8 MIMO was used on the downlink.

The LTE North America World Summit 2011 conference takes place on the 8-9 November 2011

TeliaSonera has made a bid for Polish incumbent Polkomtel

Dominant Nordic telco TeliaSonera has confirmed a bid for Polish operator Polkomtel, joining a rumoured ten other operators (including Spain’s Telefonica and Norway’s Telenor) looking to expand into the area.

Polkomtel, which operates as Plus in Poland, offers voice and 3G wireless services to a customer base in excess of 14 million and is owned by five shareholders, including Vodafone. The latter’s 24.4 percent stake gave it first-refusal on the remaining shares but it has been clear for some time that the UK-headquartered carrier would not be taking that option; last year it separated its Polkomtel shareholding out from the rest of its European division, indicating that a sale was imminent. The value of any potential Polkomtel deal has been estimated at $5 billion.

Vodafone’s 2010 strategy of divesting and streamlining operations in order to play to regional strengths saw it offloading its 3.2 percent stake in the world’s largest carrier, China Mobile, in September last year while stakes in Verizon Wireless and French carrier SFR joined Polkomtel and Bharti Infotel outside its reformed organisational units.

TeliaSonera operates in Finland, Sweden, Norway, Denmark, Latvia and Estonia and was the first telco in the region to offer the iPhone. It has over 150 million customers in the region and was the first operator in the world to commercially launch 4G.

the auction will begin on February 28th, 2011

The Swedish telecoms regulator, PTS, has set a date for the auction of wireless broadband spectrum in the 800GHz band, making the announcement on the eve of the first anniversary of the commercial introduction of LTE. The auction will begin on February 28^th 2011, with interested parties required to apply for participation by the end of January.  Nordic carrier TeliaSonera launched the world’s first LTE service in Stockholm and Oslo on December 14^th last year.

In total, 2 x 30MHz of spectrum is being made available, split into six licences of 2 x 5MHz each. A spectrum cap means that no one bidder can win more than 2 x 10MHz of the total available spectrum, as the regulator wants to ensure that at least three carriers win spectrum. Sweden currently has three mobile operators.

PTS is also imposing a coverage requirement on one of the licences in a bid to help meet the objectives of the Swedish government’s Broadband Strategy programme.

The conditions attached to this licence state that the winning bidder must deploy service so that all permanent homes and businesses that are currently without broadband service are covered by the new rollout. This deployment will be given a fixed cost, decided at the auction—it will be no less than SEK150m ($22.13m) and no more than SEK300m ($44.2m).

The successful bidders for the technology neutral licences must also undertake to remedy any interference that arises with Swedish TV broadcast services.

Sweden was one of the first countries in the world to get a commercial LTE service, when national carrier TeliaSonera launched in Oslo and Stockholm a year ago. Since then TeliaSonera has premiered LTE services in Finland and Denmark. The carrier’s operations in Lithuania, Latvia, Uzbekistan and Estonia have all launched 4G trials, it said.

Tommy Ljunggren, SVP and head of system development, mobility services at TeliaSonera

Nordic carrier TeliaSonera is no stranger to the limelight, having blazed a trail with its commercial LTE deployments. But the firm has also caused a stir by calling trials of the technology “unnecessary” and claiming that the only differentiator vendors have to compete on is price. Telecoms.com recently caught up with Tommy Ljunggren, SVP and head of system development, mobility services at TeliaSonera to get more of his thoughts on 4G.

With commercial networks already running in Sweden and Norway, TeliaSonera is understandably anxious to get the LTE ecosystem moving to clear the end user device bottleneck. To date there are only single mode dongles available, with multimode ones on the horizon and handsets and devices somewhere in the less visible future.

“It’s very exciting to be blazing the trail with LTE but we would very much like to have some pals on the running track because the whole industry needs to move now into LTE,” Ljunggren said. “I’ve launched 2G and 3G and now 4G and the boring thing is that LTE all seems a little bit too easy, we haven’t had many pitfalls, so it’s a promising technology in that sense as it’s simple, easy, and optimised for data. But we need to have some kind of fallback with 2G and 3G and we’ll likely see more voice over LTE via IMS – that’s really where IMS is taking off and voice might be where the application for IMS is.”

TeliaSonera chose Ericsson, Nokia Siemens Networks and Huawei as infrastructure suppliers for its LTE deployments, with Ljunggren causing something of a stir by revealing that there is very little, if any, technical difference between vendor offerings.

“We looked at all the technology offerings and all the features on offer by the vendors we evaluated and in the end they were all on a par. So it just came down to price. That was the only selection criteria,” he said.

“Will LTE pay for itself? I don’t know. But it’s easier because there are so many nodes that we have taken away, and its beneficial that we have focused on data only and not complicated it with voice and voice integration with legacy systems and so on.

“Now that we are pioneers we probably got a very good deal on LTE but on the pricing models we need to make some changes. When we did the evaluation of vendor s we looked at total cost of ownership – the software fees to upgrade for speed or renew function – and that can be expensive because you have to pay for each base station several times, which is what we have been doing in 3G. That’s where the pricing model is now and that has to change,” Ljunggren said.

So with the infrastructure in place and the devices on the way, what of the services? Ljunggren is also of the growing belief that flat rate data has had its time in the sun. “We should not run into flat rate pricing model as we did with 3G. For 4G we should bring a new model forward. Perhaps bring in a pricing model according to speed or different classes of service for the users.

“One important role for the operator is to provide a very good bit pipe and make revenues out of that from subscription fees and so on. But then also we have to have good partners that can bring attractive content to the table. I think we’ve gone quite far down that path where we can make good money from the bit pipe part and from the services part, and it’s true that maybe sometimes we choose a bad partner and have to learn from that.”