Tdc A/S Business Information, Profile, and History

Company Perspectives:

It is TDC's vision to be the best provider of communications solutions in Europe. TDC will strive to be a company that always provides excellent service, always offers new innovative and interesting services--and a company that always takes good care of its customers and offers outstanding customer care.

TDC is for people who want communications tools that work and will enrich their lives. Busy people do not necessarily want the very latest gadgets, but just proven technology that can help them manage their lives better.

That is why the companies in the TDC group bring all the latest communications technology together in a simple and reliable way.

History of Tdc A/S

TDC A/S--formerly Tele Danmark, itself created from the former state-owned telephone monopoly--is Denmark's top telecommunications provider, with more than three million fixed line subscribers and more than two million mobile telephone customers. In addition to its core telephony services, TDC is also the leading Danish Internet services provider, with more than 830,000 subscribers. In addition, the company is a leading provider of cable television services in Denmark, with nearly 900,000 subscribers. Yet since the early 2000s, TDC has been restructuring itself as an international telecommunications group--by 2004, more than 55 percent of the company's revenues come from outside of Denmark. For its international expansion, TDC has focused in large part on the mobile telephone sector in central and Eastern Europe, acquiring stakes in companies in Lithuania (Bité GSM), the Czech Republic (Ceske Radiokomunikace), Poland (Polkomtel), Hungary (Hungarian Telephone & Cable Corp.), and Austria (Connect Austria and one). Switzerland is the company's most important foreign market, where its TDC Switzerland subsidiary is that market's second leading provider of mobile telephony, Internet, and other telecommunications services. In Germany, the company owns Talkline, the third largest mobile telephone company in that market, and TDC is also present in the Benelux market through its stake in Belgacom. TDC's restructured operations are now conducted under seven core divisions: TDC Tele Danmark; TDC Mobil International; TDC Switzerland; TDC Internet; TDC Cable TV; TDC Directories; and TDC Services. In 2003, TDC posted revenues of more than DKK 50 billion ($8.3 billion). SBC of the United States owns more than 41 percent of the publicly listed company.

Building the Danish Telecommunications Market in the 20th Century

Although the economies of the Scandinavian countries remained modest in the mid-19th century, the region proved highly receptive to newly developing technologies. In particular, the region was among the earliest adopters of the new telecommunications services, starting with the telegraph, invented in that era.

Denmark itself played an important role in the development of telecommunications technologies. In 1829, a Danish physicist, Christian Oestrad, had pioneered the principle of electromagnetism. Using a live electric wire, Oestrad was able to push the dial of a compass, proving that an electric current was capable of producing a magnetic field. The discovery, which in turn led to the use of magnetic fields to create electricity, became a cornerstone of the development of the telegraph and especially the telephone, patented by Alexander Graham Bell in 1875.

Bell's company soon began marketing its technology worldwide, but also began setting up its own telephone networks in a large number of foreign markets. Such was the case in Denmark, where Bell established the country's first telephone exchange in Copenhagen in 1881. Observers at the time looked on the telephone as a novelty destined primarily for the consumer market, yet the Bell company found its first customers chiefly among the business sector, connecting 22 subscribers that year.

By then, however, governments had begun to recognize the strategic importance of the new telecommunications technology. Foreign ownership of the telephone networks was banned in many countries. In Denmark, the Bell company was placed under Danish ownership in 1882, and renamed as Kjøbenhavns Telefon-Aktieselskab (KTAS). That company remained focused building Copenhagen's telephone network. Meanwhile, a number of new, primarily local companies sprang up throughout the country. By the end of the century, Denmark already counted some 25,000 telephone subscribers.

The early years of the new century saw the adoption of the telephone intensify. By 1910, KTAS alone numbered nearly 50,000 subscribers--and reached 250,000 subscribers by the end of World War II. Like most European countries, the country's telephone sector was placed under government control following the PTT model--bundling the country's post office, telegraph, and telephone services into one central organization. Nonetheless, the telephone sector remained fragmented among a large number of local companies until the early 1950s.

Breaking the Model in the 1980s

At that time, the PTT moved to reorganize the telephone sector into three larger regional companies, including KTAS, Jydsk Telefon, and Fyns Telefon, while the PTT itself directly operated the telephone networks in Southern Jutland and the island of Møn. The PTT also became responsible for radio-based telecommunications, as well as radio and television transmission, and telegraph and international telephone connections.

The restructuring, coupled with the booming Danish economy in the postwar years, led to the increased penetration in the telecommunications sector. By the early 1960s, KTAS, the largest of the regional telephone groups, already boasted more than 500,000 subscribers, and topped the one million mark by the late 1970s.

In the mid-1980s, however, Denmark became one of the first of the European markets to begin the long deregulation and privatization process that was to last through much of the rest of the century. In 1986, the country took the unusual step of abandoning the PTT model. Instead, the government created a fourth regional telecommunications provider, Tele Sønderjylland. At the same time, a new company, Telecom A/S, was established to provide international telecommunications services.

Denmark's small size in the face of the impending internationalization of the European and global telecommunications markets led to a further restructuring of the country's telecom sector. While many countries were in the process of breaking up their domestic telecommunications monopolies, the Danish government instead appeared to take the opposite direction. In 1990, the government merged the four regional telecommunications companies, together with Telecom A/S, under a new umbrella entity, Tele Danmark.

At first acting as a holding company for its five subsidiaries, Tele Danmark quickly began a move toward direct control of the national telecommunications network. In 1991, Tele Danmark acquired Tele Sønderjylland and Fyuns Telefon. The company also took control of Telecom A/S at this time. The following year, Tele Danmark acquired full control of KTAS and Jydsk Telefon, both of which had already been partially privatized, as well.

Restructuring for the New Century

These moves paved the way to the first stage in Tele Danmark's privatization. In 1994, the Danish government launched a public offering of nearly 49 percent of Tele Danmark. The share issue, a large percentage of which was issued in the United States through American Depositary Receipts, raised more than DKK 18.5 billion ($3 billion), marking the world's largest international share issue at the time.

Following the public offering, Tele Danmark began to reorganize its operations ahead of the deregulation of the Danish market, scheduled for 1996, and in preparation for the completion of its privatization slated for later in the decade. The company now merged all of the former regional telephone companies, together with its other subsidiaries, including its growing Internet and data communication operations, under a single corporate entity, Tele Danmark.

With its home market opened for competition in 1996, Tele Danmark began looking elsewhere for growth. In 1996, the company joined in an investment group to acquire 49.9 percent of Belgium telecommunications company Belgacom. Tele Danmark's own stake in Belgacom came to 16.5 percent; partner Ameritech acquired 17.5 percent.

That deal set into motion a closer relationship with the U.S. telecom giant. In 1997, Tele Danmark and Ameritech agreed to form a strategic partnership as part of Ameritech's efforts to enter the European telecommunications market. As part of the agreement, Ameritech agreed to acquire an initial 34 percent stake in Tele Danmark, later raising its shareholding to nearly 42 percent.

Tele Danmark continued forging its own path into the European market, buying up German mobile telephone group Talkline, which grew into that market's third largest player. At the same time, Tele Danmark targeted growth in the central and Eastern European regions, buying up stakes in telecom--especially mobile telephone--and Internet companies in Lithuania, Hungary, Poland, the Czech Republic, and the Ukraine, as well as in Sweden.

The partnership with Ameritech provided the company with the clout needed to take on its far larger competitors in France, Germany, the United Kingdom, and elsewhere. As the company's chairman told Telecommunications Reports: "In an international context we are small. The company has already actively and successfully participated in the highly competitive international telecom market on our own and in various partnerships. In that process the advantages of a strong and well-placed strategic partner have become clear."

With its growing success at penetrating the European market--particularly the development of a web of alliances, such as its partnership with Belgacom to launch a mobile telephone network in The Netherlands in 1998--Tele Danmark moved to complete its privatization. In January 1998, Tele Danmark bought out the majority control of its shares that had been held by the Danish government. The following year, Ameritech merged with SBC, forming SBC Communications, which now took over Ameritech's former stake in Tele Danmark.

Tele Danmark changed its name to TDC in 2000, a move that served to underscore its transformation from a small, domestic market-focused telephone monopoly into a full-fledged European telco with far-reaching international ambitions. Yet not all of TDC's expansion efforts came to fruition--its attempt to dominate the Scandinavian telecom market met with strong resistance from rivals Telia, Telenor, and Sonera.

More successful for the group was its entry into Switzerland in 2000, with the purchases of Internet and mobile telephony providers sunrise and diAx. These companies were then merged into a single operation, TDC Switzerland. Meantime, TDC had been engaged in a new restructuring of its operations, converting to a holding company overseeing seven primary subsidiaries, including TDC Teledanmark, TDC Mobile International, and the company's primary foreign subsidiary, TDC Switzerland.

Yet TDC remained a relatively minor player in the international market, despite backing from its primary shareholder SBC. Merger talks between Telia and TDC failed to find agreement in 2001, ending hopes for the company's participation in the emergence of a single Scandinavian telecom powerhouse. Instead, the company turned its focus more firmly on the central and Eastern European market, where the company acquired Austrian mobile telephone group one, and a stake in Poland's Polkomtel. The company also joined with Deutsche Telekom in 2003 in a bid to acquire control of the Czech Republic's Ceske Radiokomunikace, or Radiokom, the country's second largest telecom company. As part of that process, the company announced its interest in selling off its stake in Belgacom.

TDC emerged from the crisis affecting the global telecommunications sector in the early 2000s with solid operations. The company had transformed itself from a tiny domestic operation to a fast-growing international telco, with stakes in more than a dozen countries--including majority control of nearly a dozen major domestic players in the mobile telephone and Internet sectors. Yet TDC itself was widely seen as a candidate for acquisition by one of its larger rivals--a possibility that took on greater likelihood with SBC's announcement in late 2003 of its intention of pulling out of the European market. Nonetheless, for the near future at least, TDC expected to continue its drive to become a major player in its target markets.

Principal Subsidiaries: TDC Solutions; TDC Mobile International; TDC Switzerland; TDC Directories; TDC Cable TV.

Principal Competitors: Turk Telekomunikasyon End A.S.; Verizon Communications Inc.; Vivendi Universal S.A.; Vodafone Group Plc; France Telecom S.A.; Deutsche Telekom AG; Telecom Italia S.p.A.; Telefonica S.A.; Telia AB.

Chronology

• Key Dates:
• 1881: The Bell company installed the first telephone exchange in Copenhagen, with 22 subscribers.
• 1882: The Copenhagen exchange is placed under Danish control and becomes Kjøbenhavns Telefon-Aktieselskab (KTAS).
• 1945: KTAS numbers 250,000 subscribers.
• 1950: PTT establishes control over the telephone market, regrouping local telephone companies into four regional telephone companies.
• 1986: PTT abandons control of the telephone market in the first step toward deregulation, creating Telecom A/S to take over international phone connections.
• 1990: Tele Danmark is created as a holding company for four regional telephone companies and Telecom A/S.
• 1992: Tele Danmark completes acquisitions of regional telephone companies.
• 1994: Tele Danmark is privatized with a public share offering, reducing the government's stake to 51 percent.
• 1995: Tele Danmark merges with its subsidiaries.
• 1996: The Danish telecommunications market is deregulated; Tele Danmark begins international expansion with the acquisition of a 16.5 percent stake in Belgacom.
• 1997: Tele Danmark and Ameritech form a strategic partnership, giving Ameritech a 34 percent (later 42 percent) stake in Tele Danmark.
• 1998: Tele Danmark acquires the remaining share from the Danish government, completing its privatization.
• 1999: SBC Communications becomes the primary shareholder after its merger with Ameritech.
• 2000: The company changes its name to TDC; the company acquires sunrise and diAx in Switzerland, which are merged to form the primary international subsidiary TDC Switzerland; the company completes a restructuring into the holding company TDC and seven primary subsidiaries.
• 2003: TDC announces its intention to sell off its stake in Belgacom; the company joins Deutsche Telekom in a bid for the Czech Republic's Radiokom.
• 2004: SBC announces its intention to sell off its stake in TDC as part of a pullout from the European market.