Two things were now going to play a large role in Ulf Johansson’s life: being CEO of Pharos and establishing a new operator in the GSM market. He also needed a CEO for this operation and asked Mats Ljunggren, who accepted and left Ericsson in April 1990. Pharos, Custodia, Volvo and SAS owned equal shares of the newly established company, Nordic Tel PCN AB. To begin with, each owner invested SEK 15 million in the company and committed themselves to later injections of an additional SEK 165 million each.

In February 1990 Nordic Tel submitted an application to Televerket for a frequency-allocation license that would enable the company to become an operator in the new GSM band. As the name suggests, the intention was to expand operations to cover all of Scandinavia.

However, these ambitions were widened a little. Johansson soon found himself discussing a partnership for an NMT 450 license in Poland with Bo Magnusson at Televerket, for instance. Nordic Tel also became a partner in this project and Ljunggren played an active role in drawing up the application at Swedish Telecom International AB, owned by Televerket, in the World Trade Center in Stockholm.

The Polish license went to a competitor, however, and soon there was an early setback in Sweden too. Televerket’s frequency regulator released the information that Comviq had already been allocated one-third of the frequency band for GSM. “And Stenbeck was shrewder than I was. He had involved politicians in his plans in advance,” says Johansson.

The regulator’s plans for the other two-thirds were that Televerket would be awarded one while the final third would go to whichever of the two competitors was most successful with GSM.

"TO SMALL MARKET FOR THREE OPERATORS"

The next setback was the decision by the frequency regulator to reject Nordic Tel’s application. Its reasons were that having three operators would not allow economically efficient use of the frequencies and that the market was too small.

At the time, Sweden did not have a Telecommunications Act but rather just a few paragraphs in its legislation referring decisions to Televerket. Because it was a public agency, however, companies could appeal against its decisions. Nordic Tel immediately lodged an appeal with the Ministry of Communications, where Georg Andersson was the minister. Johansson knew he viewed Nordic Tel’s ambitions positively.

However, the company needed grounds for challenging the frequency regulator’s decision. To deal with the market situation issue, Ljunggren found a survey from Australia that identified positive aspects to having three competing operators.

When it came to the economic use of frequencies, availability calculations had to be made for scenarios with two or three operators along with assumptions about the number of subscribers, length and frequency of calls during peak traffic, and about how small the cells could be.

CRITICAL AREAS

Ljunggren says: “I assumed that Sergels Torg in central Stockholm and the Essinge expressway were critical areas in terms of mobile traffic and calculated that the systems there would hit the ceiling after six years with two operators and seven with three. In other words, our argument was that small cell technologies had to be developed in either case, or they needed new frequency bands.”

He described the situation to a good friend, Rune Andersson, who had been a fellow board member for the students’ union at Chalmers University and was now CEO of Trelleborg, one of the partners behind Custodia. Andersson understood politicians and put it like this: “It is not that usual for the government to override a public agency so there have to be powerful arguments. And even if your calculations are correct, nobody is going to believe you. You have to get a professor to guarantee their accuracy. No, get two.”

Which was what Ljunggren did. Professor Jens Zander in Stockholm and Johan Karlsson, who was working on a research degree in North Carolina under the supervision of Professor Ulf Körner in Lund, each submitted opinions in which they confirmed that the assumptions were reasonable and the results correct.

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

Contact info/About the site