Nordic telecom giants TeliaSonera and Tele2 step up competition as demand for bandwidth booms.

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Nordic countries have the most linked-up economies in the world, with Sweden taking the lead of the Global Information Technology report ranking, according to World Economic Forum. Last year TeliaSonera was the first operator in the world to launch commercial 4G services, in Sweden and Norway.

Now the demand for bandwidth accelerates and operators see signs of recovery in the Nordic markets as revenues starts to pick up.

Nordic telecoms giant TeliaSonera, the first of the major operators to report first-quarter earnings, said on Tuesday it had returned to profit in the first quarter, helped by cost cuts and stronger margins. The following day Tele2 reported a stronger-than-expected rise in first-quarter net profit.

“We continued to do well in the Swedish postpaid segment and we still aim to increase our market share. More importantly, Q1 2010 showed a stabilizing ARPU (Average revenue per user) profile in the consumer postpaid segment, which to me is an early sign of a market recovery”, Tele2’s chief executive Lars Nilsson said.

TeliaSonera, the result of a 2002 merger between the Swedish Telia and Finnish Sonera, said it maintained its 2010 outlook for sligthtly higher sales and margins compared to last year.

"The growth that we saw in the first quarter makes me more confident than a couple of months ago that we will reach our forecast of somewhat higher net sales in local currencies than last year," Telia Sonera’s chief executive Lars Nyberg said. “We believe that now is the time to selectively increase our investments in bandwidth, both in our fixed and mobile networks”.

The group's net profit was 4.72 billion kronor ($659 million), a rise of 6.4 percent compared to the previous tear. Net profit was down 13 percent in the fourth quarter of last year.

Tele2 posted net profit of 1.27 billion kronor ($177 million) for the first quarter, up 91 percent from a year earlier and ahead of analysts' expectations.

"It is a good report. Russia looks strong and they have raised guidance, which has to be seen as positive," Anders Wiklund analyst at Evli Bank, told Reuters. "Profitability was strong across the board, even if sales were somewhat weaker. Sweden also looks good."

Last year the Nordic telecom companies expanded their domestic mobile subscriber bases, thanks largely to growth in mobile broadband. In February HSBC Bank said that the upswing was likely to grow stronger this year.

“We expect this trend to continue, and given already low mobile termination rates (MTR), the Nordic markets might see better total mobile revenue growth than elsewhere in Europe”, Dominik Klarmann, European telecoms analyst at British HSBC Bank, said in a report.

“However, we also expect domestic mobile capex to rise as data traffic explodes and 4G services attract early adopters – TeliaSonera has launched LTE-based services in Sweden and Norway, and Telenor and Tele2 are set to follow in 2010”.