Spain Opens Up 3G

The Spanish government is to allow network sharing among its four UMTS (Universal Mobile Telecommunications Standard) license holders, despite fears the move may have come too late to save struggling newcomer Xfera Mòviles.

The greenfield 3G carrier is stuck in a financial crisis and trails rivals Telefònica Mòviles SA, Vodafone Spain, and Amena in meeting infrastructure build-out deadlines (see Vivendi to Sell Xfera Stake). The company, backed by TeliaSonera AB (Nasdaq: TLSN), is obliged to invest €135 million (US$172 million) in its network by mid 2004 or risk forfeiting its license.

In a statement that's short on specifics, Spanish authorities have confirmed that the four carriers will be permitted to share their networks, a move meant to ensure all players launch commercial services this year.

“We will allow agreements to share networks, and we will maintain at a general level the requirements and commitments for holding a license,” says Juan Costa, Minister for Science and Technology. “Without doubt, 2004 will be the year for launching third-generation mobile telephone services, and the Ministry trusts that all operators currently holding licenses will begin commercial services at some stage during 2004.”

Analysts remain less optimistic. While striking a network agreement with a Spanish UMTS player will put Xfera back on the competitive map and provide it with a short-term lifeline, it is not certain that larger operators with established UMTS networks will actually want to give a competitive hand to a rival carrier.

“Although network sharing will drive network savings, the longer-term prospect of competing in a market with one less competitor will be more appealing,” claims Emma McClune of Current Analysis, "and Xfera will probably struggle to ink an agreement with these operators."

“The statement comes rather late in the day for Xfera, which now has just six months to establish a network presence or forfeit its license. Any network sharing agreement negotiation... will undoubtedly be hurried and more likely flawed.”

IDC senior analyst Paolo Pescatore concurs. “You could argue that it isn’t fair on the more established carriers such as Telefònica, which has already opened its networks for testing [see Telefònica Mòviles Pushes UMTS]. The market is tough. Hutchison 3G is the only startup player to have come out as a true competitor, but they have the resources… Xfera is a local player, so you have to question whether it has the resources? This may be too late for them.”

Xfera's Website appears, at the moment, to be inactive.

The Spanish move follows a number of high-profile efforts by Europe’s ruling bodies to relax stringent rules surrounding deployment of 3G technology (see Europe Relaxes on 3G). The European Commission has recently given the green light for network sharing in Germany and the U.K., which is expected to spur quicker rollout in both countries (see EC OKs German 3G Net Sharing and EU OKs UK 3G Network Sharing).

The Italian and Austrian governments have also loosened restrictions on the sale of 3G spectrum, allowing carriers to trade UMTS frequency and pocket the financial return (see Spanish Grasp Italian Lifeline and Móviles Sells Austrian 3G Arm).

UMTS is the third-generation European standard upgrade for existing General System for Mobile Communications (GSM) networks that uses a Wideband CDMA (WCDMA) air interface to increase the data rate over the wide-area network to a potential maximum of 2 Mbit/s.

— Justin Springham, Senior Editor, Europe, Unstrung