|Innovating The Next Big Thing||May 23, 2013|
• Telecom & Commerce
• Smarter Phones, Devices & Apps
• Enterprise Mobility
• Wireless Web
• Arts & Entertainment
• Tablets & Notebooks
• Safety & Security
• Remembering 9/11
Next Innovator Group
Feedjit Live Web Stats
• Ghost City
Ovum: Vodafone and Telefonica finally share their UK networks
Jun 8, 2012 – Emeka Obiodu, Jeremy Green
Vodafone and Telefonica have announced plans to share their UK networks as they seek a cost-effective plan to provide coverage to 98% of the UK by 2015. The operators are to create a new 50/50 joint venture company that will consolidate their existing network infrastructure, and lay the foundation for further sharing on LTE.
We are not surprised at the deal, and had previously suggested that Vodafone and Telefonica needed to consider a network share in order to avoid being competitively disadvantaged following the merger of Orange and T-Mobile. While no details of cost savings have been released, Ovum estimates that combined savings of over £1bn across 2G, 3G, and 4G are achievable by 2015.
A decision that makes absolute sense
From the moment that Orange and T-Mobile merged to form Everything Everywhere, the competitive dynamics of the UK mobile telecoms market changed. Everything Everywhere inherited the MBNL structure between T-Mobile and 3, effectively creating a network sharing structure for Orange, T-Mobile, and 3.
By opting to extend their light-touch Cornerstone partnership, Vodafone and Telefonica have recognized that they were competitively disadvantaged in the marketplace compared to their rivals. As three of those rivals shared the cost of running a UK-wide network, Vodafone and Telefonica were each saddled with the cost of running a UK-wide network nearly independently. Over time, this extra cost burden would have hit their operating margins and prevented them from effectively competing with their rivals.
Both parties can expect to save approximately 25% of their network costs
The beauty of the deal is that both Vodafone and Telefonica can look forward to saving at least 25% of their network costs. In a briefing with analysts, the CEOs of Vodafone UK and Telefonica UK opted not to disclose any financial expectations from the deal. However, they did concede that they are going ahead only because they see clear financial benefits.
Considering that Vodafone UK spent £575m in capex in the year ended March 31, 2012, this could lead to savings of over £100m per year. Over the three years from now until 2015, when both parties expect to achieve 98% indoor population coverage across 2G and 3G, the combined potential savings would be in excess of £600m.
By the time both parties roll out LTE, the potential savings would even be higher. The CEOs told us that the network sharing deal at the 2G and 3G levels, especially with the installation of single RANs, is laying a solid foundation for further sharing on LTE. If we assume that it could cost up to £1bn for each operator to roll out LTE in the UK, the combined potential savings for both Vodafone and Telefonica from this deal would be worth in excess of £1bn by 2015.
Ultimately, at least 50% of all LTE rollouts will use shared networks
While there is no certainty yet about how LTE spectrum will be divided up in the UK, this deal lays the groundwork for both parties to build out a single LTE network in the country. That means that, effectively, the UK is set to become a country with only two physical LTE networks: one from the Vodafone-Telefonica group and one from the Orange-T-Mobile-3 group.
Ovum is not surprised at this: since 2009 we have warned that the financial realities facing mobile telcos mean they have no choice but to share their networks. We posited that most countries will end up with not more than two networks. We also expect that at least 50% of all LTE network rollouts in the world in the next five years will involve some form of network sharing.
» Send this article to a friend...
» Comments? Tell us what you think...
» More Telecom & Commerce articles...
Commentsblog comments powered by Disqus
Support This Site
• 5/10 Ovum: Ovum comments: GB smart meter delay better late than never
• 5/9 Wireless Watch: Microsoft/Nokia alliance at crossroads as both ponder OS futures
• 5/9 Wireless Watch: Apple must rethink far more than the iOS user interface
• 5/9 Faultline: Quantenna gets closer to ST Micro, expect it to get “ascloseasthis”
• 5/9 Faultline: Microsoft volunteers to take Nook, as Barnes and Noble start to breakup
• 5/8 Ovum: Government policy-makers need to create a level playing field for cloud services procurement
• 5/7 Ovum: Analyst View: TPG looks to become Australia’s fourth MNO
• 5/7 Ovum: Analyst view: UK G-Cloud to champion public cloud
• 5/2 Ovum: Analyst view: Facebook’s Q1 2013 results
• 5/2 Wireles Watch: ZigBee Alliance completes Smart Energy Profile 2:
• 5/2 Wireless Watch: AMD, AT&T and Ericsson – wireless value chain shifts to IoT
• 5/2 Faultline: Netflix Hastings predicts OTT world – should stick to profit predictions
• 5/2 Faultline: Ziggo to add 1m homespots by August, work with Liberty Global
• 5/1 Ovum: Ovum says insurers must deploy predictive analytics to navigate through future complexity and chaos
• 4/29 Ovum: Analyst view: Telenor to buy Globul
• 4/29 Ovum: Analyst view: Infosys partnership with IPsoft breaks new ground in service automation
• 4/29 Ovum: Ovum forecasts social messaging apps will cost operators $32.6bn in 2013 growing to over $86.0bn in 2020
• 4/26 Ovum: Informa PLC announces executive management change at Ovum
• 4/25 Wireless Watch: US mobile market continues to shift, but at least there’s new blood this time
• 4/25 Wireless Watch: LTE cannot solve all a cellco’s problems single-handed
• 4/25 Faultline: Verizon, AT&T continue zero sum broadband game, video up
• 4/25 Faultline: CEA says tablets, smartphones on the rise, mobile dominates spending
• 4/24 Ovum: Analyst view: Apple beats financial analysts’ estimates, but is this a good thing in the long term?
• 4/23 Ovum: Ovum recommends CIOs to explore design-thinking techniques for complex ICT projects
• 4/23 Ovum: Analyst view: EE’s Q1 results – it’s all about those LTE numbers
• 4/22 Ovum: Ovum warns telcos not to rush to expand into additional countries
• 4/18 Wireless Watch: Mobile web challengers need far more than HTML5 to destabilize Google
• 4/18 Wireless Watch: Facebook and Google build anti-Apple teams
• 4/18 Faultline: LGI cannot buy KDG – so what’s really going on
• 4/18 Faultline: WiFi offload to become the cellular kingmaker
• 4/17 Ovum: Ovum says look beyond technology to the cultural aspects of gamification
• 4/16 Ovum: ACHIET-Ovum Observatory: Telecoms industry boosts socio-economic development in Latin America
• 4/16 Ovum: Social messaging can be monetized, says Ovum
• 4/16 Ovum: Australian CIOs say cloud services adoption is currently marginal but momentum is building
• 4/12 Ovum: Analyst view: Microsoft softens the blow for businesses struggling to upgrade from Windows XP
• 4/11 Faultline: Swedish Magine cloud to break over Spain and Germany
• 4/11 Ovum: Ovum Industry Congress 2013 will map how agility and innovation can enable businesses to face today’s disruptive trends
• 4/11 Wireless Watch: The new-look RAN ushers in disruptive economics and vendor shake-up
• 4/11 Wireless Watch: Google increasingly isolated in its own Android kingdom
• 4/11 Faultline: Broadcasters move towards IP only delivery, common ecosystem
• 4/9 Ovum: Analyst view: EE is doubling speeds and capacity
• 4/9 Ovum: Ovum warns European retail banks must not ignore social media
• 4/4 Ovum: Analyst view: Facebook needs a mechanism to deliver its own services to a portfolio of devices.
• 4/4 Ovum: Analyst view: Facebook’s Android launcher better targets millions of Android users
• 4/4 HP Improves Enterprise Mobility with Cloud-based Management Solution
• 4/4 Faultline: US networks will fight Aereo all the way to Congress
• 4/4 Faultline: Ericsson makes bid to outsource global broadcasting
• 4/3 Ovum: Analyst view: Cisco’s acquisition of Ubiquisys
• 4/3 Ovum: Analyst view: EU could restrict Google’s freedom to profile consumers
• 3/28 Wireless Watch: T-Mobile’s ‘no-contract’ compromise could come to Apple’s aid
Amazon Ads: More Cell Phones