Sharing assets, especially network infrastructure, is not exactly a new concept in the mobile industry. Back in the early 2000s, a handful of 3G operators in Europe and Asia - such as KPN and Telefonica/Sonera (Germany), Tele2 and Telia (Sweden), and Telstra and 3 Australia (Australia), and Vodafone Australia and Optus (Australia), entered into network sharing agreements to deploy 3G network quickly and at a lower cost.
However, due to various regulatory and businesses reasons, most of the initial attempts failed, and only a few consortiums, such as the Vodafone/Optus combo and Telstra/3 Australia partnership, managed to survive.
Despite these early setbacks, network sharing has recently returned to the spotlight, with a flurry of deals over the last 12 months, mostly in Europe, by 3G operators in a bid to save money and speed up rollout of 3G networks.
In the UK, T-Mobile and 3 UK, for example, announced a sharing deal to consolidate their 3G networks and set up a 50-50 joint venture, called Mobile Broadband Network Ltd, to manage the shared network. The two operators began early this year to combine their wireless infrastructure, with plans to complete the shared network in two years. The two will initially focus on extending wide area coverage to rural areas, partly by moving 5,000 base stations from places where their current network overlaps. Then the focus will shift next year to improving indoor coverage in dense urban areas.
Meanwhile, rival Vodafone and Orange announced plans last year to combine their radio access networks to create a single 3G network accessible by customers of both companies, which will maintain separate responsibility for quality of service, customer issues and application portfolios. While the agreement covers both existing built sites and new build sites, it also includes exploration of opportunities for sharing 2G RAN as technical solutions become available.
Driving forces
Industry players and market watchers say there are a number of different factors driving the current wave of network sharing. Not surprising, the main driver is to improve profitability through cost reduction and increase efficiency of network assets.
One of the major benefits of network sharing is that it allows operators to reduce costs associated with setting up a mobile network and increase the asset efficiency of telecom operators without compromising the end-user quality or the uniqueness of operators offerings.
By reducing duplication of network infrastructure like RAN, which comprises the costliest piece of an operator's network - cell sites and towers, base station equipment and the transmission network - operators can deliver better services for less money.
According to industry analysts, the savings for an operator from sharing networks could be considerable, with potential savings of 20% to 50% of an operator's capex and opex, depends on the level of network sharing (see side bar 'Sharing your assets', at the left).
Analysys Consulting suggests that over the long term an operator can improve its EBITDA margin by 2% to 3% through a network sharing model, a financial benefit so significant that no operators can ignore it.