Sharing assets, especially network infrastructure, is not exactly a new concept in the mobile industry. Back in the early 2000s, a handful of 3G operators in Europe and Asia - such as KPN and Telefonica/Sonera (Germany), Tele2 and Telia (Sweden), and Telstra and 3 Australia (Australia), and Vodafone Australia and Optus (Australia), entered into network sharing agreements to deploy 3G network quickly and at a lower cost.
However, due to various regulatory and businesses reasons, most of the initial attempts failed, and only a few consortiums, such as the Vodafone/Optus combo and Telstra/3 Australia partnership, managed to survive.
Despite these early setbacks, network sharing has recently returned to the spotlight, with a flurry of deals over the last 12 months, mostly in Europe, by 3G operators in a bid to save money and speed up rollout of 3G networks.
In the UK, T-Mobile and 3 UK, for example, announced a sharing deal to consolidate their 3G networks and set up a 50-50 joint venture, called Mobile Broadband Network Ltd, to manage the shared network. The two operators began early this year to combine their wireless infrastructure, with plans to complete the shared network in two years. The two will initially focus on extending wide area coverage to rural areas, partly by moving 5,000 base stations from places where their current network overlaps. Then the focus will shift next year to improving indoor coverage in dense urban areas.
Meanwhile, rival Vodafone and Orange announced plans last year to combine their radio access networks to create a single 3G network accessible by customers of both companies, which will maintain separate responsibility for quality of service, customer issues and application portfolios. While the agreement covers both existing built sites and new build sites, it also includes exploration of opportunities for sharing 2G RAN as technical solutions become available.
Driving forces
Industry players and market watchers say there are a number of different factors driving the current wave of network sharing. Not surprising, the main driver is to improve profitability through cost reduction and increase efficiency of network assets.
One of the major benefits of network sharing is that it allows operators to reduce costs associated with setting up a mobile network and increase the asset efficiency of telecom operators without compromising the end-user quality or the uniqueness of operators offerings.
By reducing duplication of network infrastructure like RAN, which comprises the costliest piece of an operator's network - cell sites and towers, base station equipment and the transmission network - operators can deliver better services for less money.
According to industry analysts, the savings for an operator from sharing networks could be considerable, with potential savings of 20% to 50% of an operator's capex and opex, depends on the level of network sharing (see side bar 'Sharing your assets', at the left).
Analysys Consulting suggests that over the long term an operator can improve its EBITDA margin by 2% to 3% through a network sharing model, a financial benefit so significant that no operators can ignore it.
In the Vodafone-Orange deal, Vodafone expects 20% to 30% of annual radio access network cash saving can be achieved in the long term and one-third reduction in combined sites through 2G and 3G RAN sharing.
T-Mobile and 3 UK, meanwhile, expect to save 2 billion pounds ($4.1 billion) over the next 10 years by sharing a national, HSDPA-enabled network.
Uwe Steffens, Nokia Siemens Networks' head of sales of radio access solutions, APAC, says while the early attempts of network sharing was about building cheap 3G network to gain a presence in the market, the underlying factor today is to build the networks to meet the tremendous growth of data traffic triggered by the introduction of flat-rate data tariff and the arrival of HSDPA. This he said has broken the difficult cycle of service take-up 3G operators experienced for some time and encouraged operators to push on with building out their networks.
'The boom in data traffic has caused mobile operators a lot of problems, because they need to invest in their existing 3G infrastructure and soon in new technologies like LTE and Wimax while maintaining parallel technologies like GSM (and in some cases CDMA),' says Steffens.
Another key factor, says Amrish Kacker, head of Asia at Analysys Consulting, is the need to enhance and accelerate rural coverage as operators expand into rural areas for new growth, where ARPU and capacity utilization are expected to be lower than in urban cities and return on investment is lower.
If nothing else, the latest developments in technology also allow operators to not only share physical passive network assets like towers, but also active components like RAN, enabling operators to move toward a more complex level of network sharing, says Kacker. For example, base stations can now be configured to transmit more than one operator's signal, which leaves each operator free to determine its own service offering using its own spectrum.
To support operators' increasing demand of network sharing, vendors like Nokia Siemens Networks, Ericsson and Motorola have already launched 3G RAN sharing equipment. NSN and Ericsson will also make available 2G RAN sharing equipment in the second quarter of this year.
Emerging markets
While network sharing, especially RAN sharing, is gaining a strong foothold in developed Europe, Margaret Rice-Jones, CEO at Aircom International, says Vodafone's recent deal in India illustrates that there is also huge potential for network sharing in low-ARPU emerging markets, as it provides an economical solution for operators to bring new technologies like 3G to rural areas.
Back in December, three Indian mobile operators - Vodafone Essar, Bharti Airtel and Idea Celluar - announced plans to merge their tower operations into a single company, called Indus Towers. The company, which will start its operations with approximately 70,000 sites, will be independently-managed and operated, offering passive GSM infrastructure services in India, such as non-electronic elements of the network - towers, air-conditioning equipment, shelters, diesel generators, battery supplies and premises. Vodafone Essar and Bharti will each a 42% stake while Idea Cellular will own the remainder.
The sheer volume and scale of network sharing of the deal, on the other hand, is also expected to accelerate vendor support for GSM sharing equipment.
Although the sharing of active component like RAN is currently prohibited in India, due to government regulation, Rice-Jones believes that regulators will increasingly be convinced of the beneficial effects - in the form of reduced tariffs to the end-customer - and will start to review this over time.
Despite this, Kacker at Analysys Consulting, says RAN sharing is still in its early stage.
'Sharing of passive network components like towers is well accepted in Asia, but RAN sharing is still a new concept and operators are still evaluating it at a very high level and not yet publicly discussing it,' he says.
Yet there is no other initiative that can deliver such vast financial benefits without compromising customer-facing services. Industry players and market watchers believe continued financial pressure will push mobile operators across the industry to continuously explore different network sharing alternative as a cost-cutting measure.
Changing mindset
Despite the numerous benefits, network sharing is not an easy game, especially when it comes to the complex model of RAN sharing.
For one thing, it requires a huge shift in strategic thinking on the part of mobile operators that have historically emphasized network coverage and reliability as key marketing points, says Robert Jansen, product portfolio manager of product area radio at Ericsson.
'Generally network sharing is not a technical project but rather an implementation of a business model to support a telecom's industrialization, and should therefore be embarked from a perspective of how to achieve the necessary scale economies and synergies needed to implement such a change,' he says. Ensuring a successful implementation of network sharing requires thorough planning of all aspects - from what services to offer end-customers to how to merge two networks geographically, operationally and technically.
It is also vital to make sure both parties' existing network assets get valued in a fair manner, while at the same time delivering full quality of service to both of the operators' end-users, Jansen adds.
Rice-Jones at Aircom says there are a number of factors that need to be taken into account. For example, she says, how to handle the calls from the shared network to the owned network‾ How to view the performance of the network‾ As the network goes down, it gets more complex, she adds.
Sharing your assets
Network sharing has been around in the mobile industry for years. In reality, network sharing can take a number of different forms. It extends from towers and power supplies to RAN and core network.
In its simplest form network sharing can consist of sharing the same site and facilities such as masts, towers, antennas, civil works, power and cooling.
Nearly all operators are engaged in site sharing one way or the other. Even though site sharing is a simple solution, it allows operators to make significant cost savings. Civil works and site rental can make up 30% and 20% of network capex and opex respectively. Another advantage of site sharing is that it is applicable on GSM sites. It also reduces visual pollution by the multitude of wireless masts in the countryside.
The next level of network sharing is the sharing of radio access network, in which a single RAN serves the core networks belonging to operators in cooperation. Usually operators will either establish a joint-venture company to operate the shared network or establish an agreement to roam onto each party's network.
In this form of network sharing complex business issues will be involved. For example, operators will need to agree on roaming prices, quality and capacity guarantees, as well as how the interfaces toward the customer are handled.
In its most involved and complex form of network sharing, two separate 3G operators will share both radio and core network elements of the network. This model will logically become a single network company with the operators becoming roaming or service companies.
In addition to the extreme examples of full sharing of RAN and core network, there are also intermediate solutions where only certain equipment is shared. For example, operators can share all passive equipment such as power supplies, racks, wiring and connector panels, in addition to site and mast sharing.