Emerging market telcos plan network sharing

Emeka Obiodu/Ovum
27 Mar 2014

Eight telcos operating in the Middle East & Africa have signed a memorandum of understanding to explore greater cooperation around infrastructure sharing. Executives from the eight telcos (Bharti Airtel, Etisalat, MTN, Ooredoo, Orange, STC, Vodafone, and Zain) together with the GSMA say that they have made this commitment to expand broadband access to rural communities.

This is a bold and welcome development as it kickstarts the necessary discussions on how to move the industry along the path of profitably providing nationwide broadband. However, given that many emerging market governments are now thinking about launching government-backed, open-access wholesale networks (so-called neutral hosts), the plan faces significant obstacles. If it is not to become a limp telco fightback against plans for neutral hosts, then we will need to see greater clarity on the actions that will emanate from the MoU.

There is little doubt that infrastructure sharing is needed

As we highlighted in our report “Mobile network sharing: a post-recession reality“, no one argues against the need to share telecom networks today. The gap between what is needed to achieve ubiquitous mobile broadband coverage and the amount of capex telcos are prepared to invest is the strongest driver for network sharing. The GSMA claims that the industry needs to invest $1.7 trillion in mobile infrastructure by 2020. This represents a capital intensity of 23% compared to the average of 17% that Ovum estimates telcos will spend on capex (see Ovum’s “Service Provider Revenue and Capex Forecast”).

Passive network sharing is widespread today and many regulators actively encourage it. Unsurprisingly, regulators have reservations about active network sharing, particularly as the notion of spectrum sharing threatens the rationale behind spectrum auctions. Emerging market telcos have largely opted to offload their 2G/3G access infrastructure to tower companies. This is now the case in India and several African countries. With 4G, network-sharing deals are increasingly common and the option of jointly building a 4G network with other telcos has been demonstrated in countries such as Sweden and the UK.

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