The long running question mark about Tele2’s future in Norway has been removed, with a SEK5.1 billion ($744 million) deal to offload the unit to rival TeliaSonera.

The combination will see TeliaSonera end up with 2.7 million subscribers, increasing its market share to around 40 per cent. Market leader Telenor has 3.2 million mobile subscribers.

TeliaSonera said that “in order to show the benefit of consolidation for the customer” – and possibly to appease the competition regulators – it will deliver 4G coverage to 98 per cent of the population by 2016, two years ahead of its obligations.

“This is a great strategic fit for TeliaSonera and in line with our ambition to strengthen our position in our core markets,” said Johan Dennelind, president and CEO of TeliaSonera.

Tele2’s long-term position in the Norwegian market has been unclear for some time, since it failed to secure 4G spectrum late last year. It began “evaluating strategic opportunities” in March.

Tele2 was previously linked with Access Industries, a new(ish) entrant which won 4G spectrum, but which does not have a significant presence in the mobile market. However, this partnership never came to fruition.

In a statement, Tele2 said that the sale will generate a capital gain of around SEK2 billion, “confirmation of Tele2’s continued focus on creating value for its shareholders”. It said that it is currently too early to provide an update on its intended use of the cash.

“The competitive constraints we faced without resources on the multiband frequency required us to evaluate different options for our Norwegian business. While we have not been able to complete our originally desired strategy, the proposed deal is good for our customers, shareholders and Tele2 as a whole,” said Mats Granryd, president and CEO of Tele2.

Tele2 Norway had net sales of SEK4.1 billion and EBITDA of SEK121 million in 2013. It has a customer base of 1.2 million and 432 employees.

Since its position in Norway has been unclear, Tele2 has been focusing its efforts on markets including Sweden, Netherlands and Kazakhstan. Last year, it also offloaded its Russian unit.

TeliaSonera said it expects integration costs of SEK250 million to SEK450 million and investments of SEK350 million. It also expects “substantial cost synergies”, estimated at SEK800 million annually from 2016.

The intention is to “continue to offer a variety of brands on the Norwegian market, both premium and low cost brands”.

Initial analyst reaction to the deal was negative, particularly in terms of its effect on the overall Norwegian mobile market. “This is the predictable result of a pretty miserable and failed spectrum licencing process, which has resulted in pretty dramatic consolidation,” said Bengt Nordström, CEO of Northstream. “Norway now essentially has two strong operators, plus a very small outfit with lots of spectrum, little infrastructure and few customers.”

Nordström described it as a “good deal” for TeliaSonera, as well as Tele2 shareholders, but also warned that it’s “a timely reminder for the mobile industry that poor regulatory decisions can create uncertainty that makes a mockery of huge infrastructure investments.”

The transaction is subject to regulatory approval from the Norwegian Competition Authority, which is anticipated at the latest by the first quarter of 2015.