Cost cutting drives UK operators into networking sharing

Dramatic moves are underway in the UK network sharing arena as details emerge that Vodafone and O2 plan to pool their networks, and Orange UK has requested permission to join T-Mobile and 3UK in their existing infrastructure sharing agreement.

These moves, if successfully negotiated, would leave the UK with its five largest cellphone operators using just two cellular networks. The five companies would continue to operate and compete under their own brand names, but could see a reduction in base station numbers of more than 50,000.

Citing people close to the discussions, the Vodafone/O2 partnership would provide them with significant Capex and Opex savings, and help Vodafone's CEO, Vittorio Collao, in attaining his stated goal of achieving annual cost savings of more than €1 billion by 2010-11. Vodafone already has a network sharing deal with Orange, that was only expanded a few months ago to include engineering, maintenance and technology, but already saves the two operators more than €1 billion a year.

Industry chatter has speculated the Vodafone/O2 deal could be a prelude to resolving a dispute with the UK telecoms regulator, which is looking to refarm the 900MHz spectrum. This action would see valuable spectrum being taken from Vodafone/O2 and offered to later entrants, unless these two firms are able to share their radio spectrum and release part of it back to the regulator.

However, these fast moving plans could fall foul of the UK Competition Commission and the Office of Fair Trading, which are certain to scrutinise the two deals to see if they amount to a merger that would reduce competition.

For more on this story:
Financial Times and Cellular News

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