When it comes to 4G, Telefónica is prioritizing coverage and quality over dazzle.

Iain Morris, International Editor

March 25, 2015

9 Min Read
Telefónica Aims High With Low-Band 4G Focus

Despite exhorting consumers to "be more dog" in a UK advertising campaign, Telefónica has barked less noisily than other big European operators about its 4G capabilities. While Deutsche Telekom, EE and Vodafone have all recently been flaunting their prowess in areas such as carrier aggregation and VoLTE, the Spanish incumbent appears to have shunned the 4G limelight.

But that does not mean it has been a 4G laggard in the European region. As rivals grab headlines with trials of fancier and higher-speed technologies, Telefónica 's priority is making plain vanilla 4G available to as many consumers as possible. "We doubled the number of basestations we have deployed globally last year and we're hoping to do the same again this year," says Ian Miller, Telefónica's director of radio access technology.

Figure 5: Ian Miller (far left), Telefonica's director of radio access technology, considers his 4G options at a recent panel discussion. Ian Miller (far left), Telefónica's director of radio access technology, considers his 4G options at a recent panel discussion.

Given the marketing obsession with connection speeds, this coverage focus arguably makes it tougher for Telefónica to draw attention to its 4G wares. Yet Telefónica's 4G customers could be enjoying a better experience than subscribers to rival services. "It's all very well going with higher bandwidth and theoretically higher speeds, but you won't necessarily get better performance with 1800MHz and 2.6GHz because of coverage issues, especially inside buildings," says Mike Smith, Telefónica's head of global LTE activities.

By concentrating on 800MHz deployments, Telefónica had extended 4G coverage to about 60% of the population across its European markets at the end of 2014. A broad objective is to make 4G services available to around 80% of businesses in its footprint by December. But the 800MHz story has not been as straightforward as the operator would like. In Spain, where broadcasters are only just relinquishing control of these airwaves, it has had to pursue a different strategy.

Iberian idiosyncrasies
Like its network rivals, Telefónica has been running 4G services in its domestic market over spectrum in the 1800MHz and 2.6GHz bands. Miller complains about the shortcomings of these frequency ranges and says the operator plans to extend 4G coverage using 800MHz spectrum "as quickly as possible." Yet the temporary lack of an 800MHz alternative has given Telefónica more reason to experiment with carrier aggregation and see what benefits it might bring.

In Barcelona and Madrid, the operator has already combined 20MHz of 2.6GHz spectrum with another 10MHz in the 1800MHz band to support connection speeds of up to 225 Mbit/s. It wants to extend this "dual-band" carrier aggregation service into Spain's other major cities this year, and has also been testing a "tri-band" service that adds another 10MHz from the 800MHz band. In a low-key announcement at this year's Mobile World Congress, Telefónica claimed to have recorded peak download speeds of 375 Mbit/s and a top speed of 50 Mbit/s on the uplink during these tri-band tests. (See Telefónica Plots 5G Route Via 375Mbit/s 4G.)

Figure 1: Spain Spectrum Holdings (MHz) [Source: European Communications Office] [Source: European Communications Office]

Used in purely dual-band scenarios, sub-1GHz spectrum might hand Telefónica a key advantage over rivals combining 1800MHz and 2.6GHz airwaves to support 4G services. The coverage limitations of higher-band spectrum tend to affect uplink more severely than downlink communications, according to Miller. By relying heavily on the low band for the uplink, and taking full advantage of above-1GHz spectrum for the downlink, an operator can overcome this hurdle, he says.

"Most of the noise is about peak speeds, but carrier aggregation is about more than giving a few people with the latest devices access to 300Mbit/s services," adds Smith. Besides helping to address coverage issues, it also obviates the need for inter-frequency handovers, which can gobble up resources, and allows operators to manage spectrum across different bands more efficiently. "As soon as you need to add a second band for capacity reasons, carrier aggregation is the way to do it," says Smith.

Next page: Aggregation Aggravation

Aggregation aggravation
Carrier aggregation could also play a role in the UK and Germany, Telefónica's two other big European markets. In the former, Telefónica UK Ltd. (trading as O2) emerged from a 4G spectrum auction in early 2013 with a generous quantity of 800MHz spectrum but nothing in the 2.6GHz band. It does, however, hold an 1800MHz license thanks to a much older awards process. And while that spectrum is currently dedicated to voice communications, O2 is now looking at the possibility of "re-farming" it for use with 4G, says Miller. Figure 2: UK Spectrum Holdings (MHz) [Source: European Communications Office] [Source: European Communications Office]

Even so, Telefónica's days in the UK look numbered. In January, Hong Kong's Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY) -- which already owns Three UK , the UK's smallest mobile network operator -- made a £10.25 billion ($15.2 billion) bid for O2, and Telefónica agreed to sell the UK business this week. Because a merger between 3 and O2 would leave the UK with just three networks, creating the country's biggest operator on the basis of customer numbers, it could yet encounter opposition from regulatory authorities. Intriguingly, however, it might open up a carrier-aggregation opportunity for the combined entity: 3 similarly lacks any 2.6GHz airwaves but has more 1800MHz spectrum than any player bar EE , the current market leader. (See Telefónica Seals $15.2B O2 Sale to Hutchison, Eurobites: Hutchison's O2 Deal Poised for Take-Off, Hutchison's Wind of Change and Hutchison Offers $13.9B for UK's O2.)

In Germany, Telefónica Deutschland GmbH 's carrier aggregation ambitions have been complicated by an upcoming spectrum auction. The operator has made some early progress with the aggregation of spectrum in the 800MHz and 2.6GHz bands, but it would prefer to use 800MHz and 1800MHz in a dual-band deployment. All of Germany's 1800MHz licenses are due to expire next year, however, apart from a 2x15MHz concession held by Deutsche Telekom AG (NYSE: DT) and another 2x10MHz controlled by E-Plus Service GmbH & Co. KG , the operator that Telefónica bought from KPN last year in an €8.6 billion ($9.4 billion) deal. (See Eurobites: Telefónica Gets EC Green Light on E-Plus Deal.)

The re-auction of those airwaves has been scheduled for May, when German authorities also plan to sell licenses to use 700MHz spectrum (currently monopolized by the broadcasting sector and not expected to be released to operators for several years). Telefónica hopes this process will give it a strong foundation for the execution of its plans. "If everyone acts rationally the expectation is that no new players will emerge and the existing players will maintain the spectrum holdings they have today," says Miller. (See 700MHz: Coming soon to Germany.)

Figure 3: Germany Spectrum Holdings (MHz) [Source: European Communications Office] [Source: European Communications Office]

Although regulators required Telefónica and E Plus to provide network capacity to mobile virtual network operators before allowing their merger to go ahead, this auction outcome would appear to leave the combined entity in a very advantageous spectrum position. Besides controlling as much 800MHz spectrum as Deutsche Telekom and Vodafone Germany , the country's other mobile network operators, Telefónica would continue to be far better off in the 1800MHz band.

Next page: Going Slow on MIMO

Going slow on MIMO
Acquiring and aggregating spectrum are obviously not the only options available to operators that want to fortify their 4G offerings. Advances in MIMO technology, in particular, have recently garnered the attention of some of the world's biggest players. Telefónica uses the standard 2x2 variant of MIMO in its 4G networks, meaning that two antennas are used in the transmitter and two in the receiver. As the labeling implies, the 4x4 version would double the amount of transmit and receiver antennas to boost performance.

Unfortunately, devices that can support 4x4 MIMO have yet to materialize. "It's tricky to do because of space constraints in smartphones," says Miller. "Some vendors are saying it's possible, but we don't think it's mainstream and so we wouldn't be advocating 4x4 deployment on LTE."

A more feasible technology is 4x2 MIMO, which would add antennas at the basestation but require no modifications on the device side. Smith reckons 4x2 MIMO could improve throughput by as much as 20% but says it would mainly benefit customers by improving signal strength at the edge of a cell. "There would be far more chance that users in poorer conditions get a better experience," he says.

In North America, T-Mobile US Inc. was widely reported to have begun rolling out 4x2 MIMO last year, while Sprint Corp. (NYSE: S) also appears to be making investments in this area. Yet Telefónica has yet to be fully convinced there is an investment case for the technology in its European markets. As Miller points out, installing additional power amplifiers at basestation sites could prove very costly. "The gains might not justify the expense," he says.

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.

VoLTE-ing ahead
A technology Telefónica looks much closer to rolling out commercially is VoLTE. Over the past few weeks, 3, Deutsche Telekom, EE and Vodafone Group plc (NYSE: VOD) have all announced or confirmed plans to launch VoLTE services this year, while Telefónica has maintained a characteristic silence on the subject. But its German network is poised to support a commercial launch of VoLTE after some finishing touches have been applied. "We want to make sure it's right and it's stable rather than rushing it out in one city just to make headlines, which you do see from time to time," says Smith. (See 3 UK to Launch VoLTE by September and Vodafone Claims to Beat German Rivals to VoLTE.)

As well as reducing call set-up times, VoLTE should allow customers to use voice and other services simultaneously. It could also spur the development of new offerings in the future, when Miller expects it to be deployed across all of Telefónica's networks. And while beating rivals to a commercial launch is clearly far less important than making sure VoLTE works properly, Telefónica's German customers may not have long to wait before VoLTE becomes available. "We'll be very disappointed if it's not enabled commercially this year," says Miller.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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