Will More Mobile Operators Dare to Share?
Unstrung Insider chief analyst Gabriel Brown suggests that Vodafone and Orange are likely to set up a network operations company. He says that generally, the mobile industry is moving toward a servco/netco business model, in which the wireless world would be split between service providers and network operators. (See Time for a Mobile NetCo?.)
According to Brown's latest Unstrung Insider report, once operators commit to RAN sharing, it makes sense to create a new company to oversee the operation.
Through the agreement with Orange, Vodafone says it expects to save 20 to 30 percent over several years on combined 2G and 3G opex and capex. "What they're trying to do is really ambitious," says Brown. "There are quite a lot of dependencies on the equipment. In theory the equipment can support it, but it still has to be done."
Vodafone and Orange, which have 17 million and 15 million customers in the U.K., respectively, aim to combine their new and existing RANs and will also consider RAN sharing on their 2G networks. But the operators will maintain independence and responsibility for traffic management and service quality on their own networks.
The two operators will share the passive infrastructure, which includes the masts, antennae, site support cabinet, and power supply. They will also share the transmission links and the radio access equipment. But they will not pool frequencies or share transceivers.
Vodafone España S.A. and Orange Spain signed a similar agreement in Spain in November 2006, but that deal only covered new 3G sites with fewer than 25,000 inhabitants. Together they will deploy 5,000 radio sites during the four-year deal. The operators are also considering 2G RAN sharing and possibly decommissioning existing sites.
Perhaps the most significant network sharing deal in terms of scale and the impact on vendors will be the one between Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Vodafone Essar in India. In February, the operators signed an agreement to share passive infrastructure, involving 70,000 towers. The operators also want to share RANs and the Telecom Regulatory Authority of India (TRAI) recently ruled in their favor to allow this. (See Vodafone Completes Buy.)
Vodafone says the deal could result in savings of $1 billion during the next five years and contribute 1.5 percent to its EBITDA margins.
Among the equipment vendors, Nokia Networks and Alcatel-Lucent (NYSE: ALU) have been the most supportive of RAN sharing. While in theory network sharing reduces the size of the vendors' market, the reports finds that it is too early to assess whether the impact on vendors will be positive or negative.
— Michelle Donegan, European Editor, Unstrung
The report, RAN Sharing: Cutting the Cost of Mobile Broadband, 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.