Analyst: Mobile data growth could double infrastructure costs within 5 years

The continuing growth in mobile data could place operators under extreme financial pressure unless they implement ways to provide bandwidth in a more cost-efficient way, according to a new study from Solon Management Consulting.

The research firm expects data traffic to increase 15-fold between 2011 and 2016 for Germany alone, which could see operator costs doubling for access and backhaul networks.

Mobile operators need to act now to meet the mobile cost challenge, according to Stephan Kalleder, principal at Solon and author of the study. Without adequate countermeasures, "network capacity requirements would almost double network Opex from 12 per cent of revenues in 2011 to 23 per cent of revenues in 2016," Kalleder wrote.

The consultancy recommends that operators need to adopt two approaches so as to reduce the danger of cost outstripping data revenues: network optimisation and network sharing.

Solon claims that accelerating the migration to LTE will provide strong benefit from additional spectrum allocation and higher spectral efficiency. Additionally, operators can benefit from actively managing network data traffic by implementing different tariff and policy models or by offloading mobile traffic to Wi-Fi or fixed lines. The company also believes that a focus on optimising video delivery--which is likely to be around 70 per cent of anticipated traffic growth over the next five years--will help limit costs.

Negotiating network sharing deals is also proving to be a highly successful strategy especially for smaller to mid-size operators, clams Solon. "By sharing the same infrastructure--from base stations to backhaul, mobile operators can save between 25 to 35 per cent of the cost of the shared site," Kalleder wrote.

Even further cost saving potential can be realised from extending access sharing to the core network, and setting up a joint network company would allow operators to take full advantage of integration. If operators adopt these infrastructure improvements, Solon believes that mobile operators will be able to increase transmission efficiency significantly and partly contain network operating expenses growth.

However, without optimisation, Solon says that operator EBITDA margins could decrease by 11 percentage points. The proposed network optimisation measures will help to limit margin risk to 5 per cent, and if the operator also enters into a network sharing agreement for its UMTS and LTE sites, network cost could almost be maintained at today's levels.

For more:
- see this release
- see this Solon Management Consulting white paper

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