T-Mobile and 3UK have announced that they have reached a network sharing agreement for their 3G networks in the UK. Following nine months of discussions, the two companies are going ahead with three objectives:
- to save capex - £2 billion ($4.1 billion) over 10 years for the two companies
- to improve network coverage for rural areas and indoor use
- to improve the quality of the network
The consolidation of the two networks will start in early 2008 and will initially focus on extending wide area coverage to rural areas, partly by moving 5,000 base stations from places where their current networks overlap. Then, in 2009, the focus will shift to improving indoor coverage in dense urban areas.
The two operators will set up a management company, Mobile Broadband Network Ltd, as a 50:50 joint venture. Its remit runs to the end of 2021.
This agreement, reported by the financial press in mid-September, follows announcements by Vodafone and Orange in the UK and Spain earlier this year, and Vodafone and others in India in the last few weeks.
In our view it makes good business sense to share the infrastructure costs for the 3G access network. For some time most 3G network operators have been in a difficult cycle of:
- modest investment in the network because of a difficult business case
- inadequate user experience because of modest investment
- low take-up because of the inadequate user experience
- continued modest investment because of low take-up
The arrival of HSDPA over the last 18 months, together with flat-rate data plans, has broken the cycle. HSDPA at last provides a user experience close to users' expectations of broadband, and flat-rate pricing gives users more confidence in their bill. As a result USB modems for 3G are selling fast in many countries and data traffic is rising very quickly on the networks.