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Also, what must be recognised is that most mobile networks are owned by operators and run fairly efficiently, which makes the business case for outsourcing firms somewhat difficult.
According to Buist, the typical sales approach from the outsourcing firms is to offer operators overall savings of between 10 and 20 per cent. "Given that the outsourcing provider is looking to make a margin of around the same, they will need to cut network costs by 30 to 40 per cent. Understandably, this is a big issue for the managed service providers, and the operators need to believe and trust that these outsourcing firms can run their business effectively at this level of reduced profitability."
Further, the dramatic increases in data traffic, driven by the iPhone and its ilk, could make such business models even more complex. With smartphone shipments forecast to rise significantly this year, the problem of managing a network could become onerous as data revenues further decouple from traffic growth.
However, this traffic upsurge is very likely to come from a relatively small number of city hotspots where smartphone usage is rocketing. Interestingly, PA Consulting maintains that up to 80 per cent of sites in any given network currently have insufficient traffic to achieve payback.
Political issues
Network sharing has suddenly become a high-profile political pawn in the negotiations T-Mobile UK and Orange UK are conducting with the European Commission over their planned merger.
In an effort to avoid the involvement of the UK Office of Fair Trading, the two firms have offered to extend a network sharing deal with 3UK to include 16,000 mast sites across the UK. This offer is based upon the existing T-Mobile UK and 3UK agreement that involves 10,000 sites.
Observers had suggested that T-Mobile UK and Orange UK would have no interest in maintaining their investment called for with the existing agreement, leaving 3UK to wither under a growing capex burden. But the offer, designed to gain prompt approval from the EC, may damage 3UK if the merged operators renege on the network-sharing deal.
The challenges presented by this bold move will be closely watched by everyone within the operator and infrastructure industry for signs of success, or failure.
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