Reference no: EM133297226

Case Study:- How did TeliaSonera leverage alliances and acquisitions to grow in Eurasia markets, which are not known to be "easy" markets?

Today, climbers can have 3G access on Mount Everest to brag about their experience on top of the world. However, not many people know that it is a Nordic company providing this service in such an alien environment. The company is TeliaSonera, which provides telecommunications services in a wide geographic area, from Nordic countries to Nepal, which includes the emerging and highly valued Eurasian markets. TeliaSonera is the fifth-largest telecom operator in Europe. It has operations in Azerbaijan, Belarus, Denmark, Estonia, Finland, Georgia, Kazakhstan, Latvia, Lithuania, Moldova, Nepal, Norway, Russia, Spain, Sweden, Tajikistan, Turkey, Ukraine, and Uzbekistan.

How could a Nordic company with roots in highly developed markets in Europe expand in such politically risky and institutionally ambiguous settings? Savvy use of alliances and acquisitions throughout Eurasia appeared to be a key. Itself the result of the merger between Telia of Sweden and Sonera of Finland in 2002, TeliaSonera certainly understood the importance of alliances and acquisitionsTo overcome its liability of foreignness, TeliaSonera leveraged its decades of telecom expertise developed in Nordic countries in Eurasia. It was the world's first operator of 4G networks first deployed in Europe. Although it did not offer 4G in Eurasia, the generally better-quality network investments provided TeliaSonera a leading edge in Eurasia, compared to local competitors. This high investment cost turned into a larger and more satisfied customer base, upgrading TeliaSonera into leading positions in most countries.

TeliaSonera faced certain challenges due to weak institutional settings, especially in former Soviet Union countries in Eurasia. Although each country was in a different phase of transition to become a market economy, the economic, legal, and regulatory systems were still highly bureaucratic and risky. The ambiguity in the institutional frameworks brings additional risks for businesses, significantly increasing the costs of investments. The telecom industry has further liabilities in terms of heavy infrastructure spending and related fix costs. TeliaSonera's success in its Eurasia expansion was largely due to its utilization of strong business and government ties that had been developed in decades throughout the company's (and its predecessors') history in the region.

In addition to the challenges, the markets in emerging economies in Eurasia presented many opportunities. In contrast to Europe, fixed landlines were not as developed in Eurasia. This, in turn, made these countries rely more on mobile networks. This, in fact, meant a jump into a higher technology for consumers in Eurasia. Moreover, mobile network penetration was lower in Eurasia than in TeliaSonera's mature markets, thus offering a great deal of potential for TeliaSonera. There were fewer competitors, which enabled TeliaSonera to attain higher margins.

Another significant aspect of market conditions is the expanding and younger population in Eurasia, in contrast to the stagnant and older population in Europe. Eurasia thus provides enormous growth opportunities for TeliaSonera. Moreover, improved macroeconomic situations and economic growth led to strong subscription intake, which increased revenues by 16% in 2010.

Nepal is an interesting case study for TeliaSonera's challenges in Eurasia. After TeliaSonera's 2008 acquisition of 80% equity of Nepalese youth brand MeroMobile, the start-up company, which was now called Ncell, grew into a GSM leader in the whole country. However, the road to success had serious difficulties. There was an ongoing political and security crisis involving terrorist attacks and union strikes, which negatively affected multinationals. TeliaSonera contributed to the efforts to overcome such host-country difficulties by offering world-class technologies to this country traditionally suffering from poor telecommunications, and by generating local jobs and employment opportunities. The base stations (cell transmission towers) increased from 300 to 1,500 in three years. As a result, the percentage of the population covered by mobile TeliaSonera networks increased from 44% to 80%. Another significant contributor was the hiring of local employees. Other than employing 25 expatriates, Ncell created 500 solid jobs for locals in a variety of positions.

TeliaSonera's operations in Eurasia aimed to be the trendsetter in these highly dynamic and low-penetration markets. For example, its alliance with a local player, Kcell (in which TeliaSonera held a 51% share), was the first company to launch GPRS technologies that provided the people of Kazakhstan the opportunity to access mobile Internet, WAP, and MMS services. Kcell owed its reputation to providing the best network coverage and also distribution systems in the whole country. There was also a great potential for mobile data in Kazakhstan, due to the young and dynamic population. Already 8% of total Kcell revenues in Kazakhstan came from mobile data in Kcell.

Question 1: Many multinational companies fail in their expansion in emerging economies. What are the main capabilities and resources that drive TeliaSonera's successful growth in Eurasia markets?

Question 2: Given the institutional differences between European and Eurasia markets, what are the main challenges faced by TeliaSonera in Eurasia? Which strategies enable TeliaSonera to minimize the risks of these challenges?

Question 3: How does TeliaSonera differentiate itself from its competitors in Eurasia?