Outsourcing Mobile Infrastructure
A growing number of operators in Europe and other mature markets no longer consider owning and operating networks to be their most precious assets or core competencies, and they seek to share or outsource their infrastructures. Also in emerging markets, operators share sites, towers, and power to accelerate network rollouts and extend coverage into rural areas. Money is unquestionably a big factor as well.
To date, most of the sharing has been for passive, non-electrical, civil-engineering elements of telecom networks, such as sites, masts, and equipment rooms. Some operators, such as T-Mobile International AG and Hutchison Telecommunications International Ltd. (NYSE: HTX), have chosen a much deeper sharing of active electronic components, in a move to establish still greater savings. Until recently, most regulators have prohibited such active sharing of radio access networks (RANs) but, given the healthy competition at the services level and the financial crunch, many are now receptive to the idea.
A new research report from Unstrung Insider, "Mobile Infrastructure: Keep, Share, Outsource? Operators Ask, Vendors Act," analyzes the evolving market for infrastructure sharing while addressing the growing interest in outsourcing. It provides insight into the various types of sharing – RAN, core network, roaming, and spectrum – as well as managed network services and full network outsourcing. The report also examines the opportunities and challenges of sharing and outsourcing for operators and vendors, in addition to covering some of the primary technical and regulatory issues.
Indeed, many forward-looking mobile communication companies now see their future more in services and less in the underlying technology that delivers them. Their focus is gradually shifting toward developing innovative services, attractive pricing schemes, and powerful brands.
At the same time, the move away from running networks will create a wealth of opportunity for companies to help mobile operators squeeze more out of their network assets through infrastructure sharing and, in a next step, through managed network services and outsourcing.
As with any new strategy in the fast-moving wireless industry, however, the decision to share, outsource, or even outright sell network infrastructure is not without its risks. Moving in the direction of services and content will bring mobile operators into direct competition with Internet powerhouses like Google (Nasdaq: GOOG). The search engine giant has undeniably shown how to offer highly competitive – and profitable – services without owning any infrastructure.
Some operators, of course, will want to keep their networks. But, ultimately, many will choose to share or outsource them – in mature and developing markets alike. In many cases, infrastructure will become a commodity shared by "mobile service providers" focused on developing and selling services and content, and will be increasingly run by the vendors that build it. That appears to be the vision of Vodafone, Telefónica, and T-Mobile on the operator side and Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks on the vendor/service side. Their vision is certain to open the eyes of rivals in both camps.
— John Blau, Research Analyst, Unstrung Insider
The report, Mobile Infrastructure: Keep, Share, Outsource? Operators Ask, Vendors Act, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.