Telenor CEO Baksaas Fights Facebook for ‘Wallet Share’ With Digital Push

Telenor ASA (TEL) has become one of the last major European phone operators to respond to the threat of a loss of revenue to Apple Inc. (AAPL) and Facebook Inc. with its own push in digital services.

“The communications industry can think in terms of maintaining a share of the consumer’s wallet and we shouldn’t shy away from this ambition,” Chief Executive Officer Jon Fredrik Baksaas said in an interview at the company’s headquarters in Fornebu, Norway.

The Nordic region’s largest phone company, with 133 million wireless customers worldwide, plans to add workers to the digital division it founded in September to assemble services like movies and banking for customers from Oslo to Kuala Lumpur. Partners so far include Google Inc. (GOOG) and Ericsson AB (ERICB) and Telenor plans to expand the 450-person venture through acquisitions as well as own growth.

Telenor is lining up with peers including Telefonica SA (TEF) and Vodafone Plc to sell telephony as a service portal rather than just a “dumb pipe” transport layer. The operators are losing voice and text revenues as users go “over the top” of operator billing systems to chat with each other through Internet access they’ve already paid for. The wireless companies don’t want to lose more.

Web Platforms

“It’s a question of if Facebook and others will be confident enough from their perspective to say we don’t need the telcos, or could they reach a more rapid buildup on the other kind of business model that we entertain,” Baksaas, 57, said in the Jan. 13 interview. “Everyone is talking to everyone to find different forms of how to cooperate.”

As competition with Apple, Google and Facebook intensifies, operators and handset makers are struggling to establish themselves as Internet platforms and to find ways to charge users separately for products like music and video. The Vodafone 360 project, intended to give customers a one-stop services and authentication platform, faces an uncertain future after its head quit last year. Nokia Oyj (NOK1V), the world’s biggest mobile-phone maker, has fought to reproduce Apple’s model with its Ovi services and has now teamed up with Microsoft Corp.

Telenor rose 0.9 percent to 97.40 kroner at the close of trading in Oslo. The shares have climbed about 5 percent over the last year, valuing the company at 157 billion kroner ($26 billion), compared with a 9 percent fall for the STOXX 600 Telecommunications Index. The company, which is also the largest broadcaster in the Nordic region, is 54 percent owned by the Norwegian state.

Google Deal

The company’s digital services unit, headed by Nordic and broadcast businesses chief Kristin Skogen Lund, announced a deal with Google in November to let its customers in 11 countries pay for Android apps on their phone bills, and will also have its own shelf in Android market. More deals will follow, Baksaas said.

The unit, which includes a team looking at acquisitions, incorporates some existing service units like Comoyo, which aims to sell movies and other services through a single login. For music, Telenor offers the WiMP service, a competitor to Spotify Inc., developed by Aspiro AB. (ASP)

Some of the new services will be “anti-churn” measures to retain customers or give them more value for money, while others generate revenue like WiMP, Baksaas said. The digital services arm may publish targets in the next year and will channel content from partners rather than creating it, he said.

Network Pressure

Besides “over the top” consumer services, Telenor is working on financial, business and machine-to-machine services in cooperation with Ericsson, Rolv Erik Spilling, Lund’s deputy chief for digital and Nordics, said in an interview. Telenor is already the largest bank in Pakistan by number of users with its Easypaisa service, he said.

Norwegian text messaging volumes peaked in 2009 and customers increasingly use social networking and platform- specific systems like iPhone and BlackBerry messaging to communicate, Baksaas said. Systems like Skype and Apple’s Facetime shift voice and video calling into the data bundle as well, adding to the pressure to recoup money for networks and profits from users on all-you-can-eat data plans.

Pricing models in Europe are in flux as data use swells and operators install faster fourth-generation systems, which treat all traffic as data. Operators are starting to charge more for better quality services and differentiate between peak and off- peak hours, Baksaas said. Time-based usage is also growing, borrowing a model from emerging markets, where people top up day by day.

The average revenue per user is an increasingly poor indicator of monthly customer spending since it typically refers to income from each subscription tracked by a SIM card, Baksaas said.

“Five years ago you had one SIM card per subscriber,” he said. “My usage has grown but now it comes from three or four SIM cards for phones, iPad, camera.”

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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