RAN sharing: now is the time
One of the greatest challenges for mobile operators today is the management of mobile data capex requirements while achieving higher ARPU from rising data usage. Maturing markets and economic realities are forcing operators to find new ways to reach financial targets. Mobile operators now have the opportunity to reshape their access network economics by forming partnerships to split the cost of mobile data.
There are also several other factors leading to an increase in access network partnerships. For a start, network upgrades are necessary to keep up with data growth. Global LTE infrastructure investment is estimated to reach $14 billion by 2015. Such investment in a climate of already low and decreasing retail prices presents a challenging stand-alone business case.
Meanwhile, spectrum is being reallocated and new frequencies are being awarded through auctions that often encourage bid-consortiums; technology is reportedly maturing to a point where multiple frequencies, technologies and operators can be served out of one "box"; equipment vendors are increasingly keen to promote 4G technologies; and private equity firms are eyeing opportunities in new generation access, given the rising demand for high-speed data.
While the technical aspects of access sharing need detailed joint design and planning, a partnership's greatest challenges relate to the legal structure, valuation, commercial models and operational management. There are several key considerations that impact the chances for a successful RAN partnership.
How does each potential partner view its radio access assets - are they predominantly revenue differentiators or opportunities for cost reduction?
Regulators will scrutinize any indication of reduced competition, so infrastructure cooperation has to be distinctly separate from retail competition to avoid objections.
Commercial models need be to designed to be as pragmatic and simple as possible.
Finally and most strategically, when a potential cooperation is considered, the best partnering options are determined quickly. Now is the time to be smart on partnerships and, while we are still in the early days of this game, great opportunities exist in most markets.
- Karim Taga, managing director, Arthur .D. Little