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Fundamentals of Mobile Network Sharing
 

Fundamentals of Mobile Network Sharing

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Given the renewed discussion of Network Sharing pros and cons I thought it made sense to wrap up several of my older presentations and update some of the information with latest knowledge. ...

Given the renewed discussion of Network Sharing pros and cons I thought it made sense to wrap up several of my older presentations and update some of the information with latest knowledge.

The myth of network sharing is clear -> huge savings and benefits often blinding the decision makers for the other side of the coin.

I hope this presentation provided a fair picture of both sides of the Network Sharing Coin!

The presentation provides more than 10 years of my work and experience since the early days of 3G Network Sharing discussions in 2000 - 2001.

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    Fundamentals of Mobile Network Sharing Fundamentals of Mobile Network Sharing Presentation Transcript

    • Network Sharing Fundamentals.(Updated & revisited thoughts on the benefits of network sharing)Dr. Kim Kyllesbech Larsen.
    • Why sharing a part or all of the mobile network?Between 40% to 50% of sites are low or no profitable (“the ugly tail”)Frees up cash to be spend in areas that matters (“Save for Growth”).Effective Opex & Capex measure increasing operational efficiencies.Increased network quality for a lot less than standalone (“Best network”).Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals 2
    • Network sharing boils down to 4 major considerations.Who to share with? (your equal, your better or your worse or all)What to share? (sites, passive, active, frequencies)Where to share? (rural, sub-urban, urban, all, etc.)How to share? (“the legal stuff”)Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals 3
    • Mobile Emerging markets – growth slowing down.Revenue 2009 – 2012 + 48% pa.Revenue 2012 – 2017 9% pa.Opex 2012 – 2017 + 12% pa.& 3G has to get started- Top-line pressure (voice & sms).- Opex pressure.MEA ExampleEmerging Market Growth on expense of profitabilityLong-term development troublesome.134%88% 111%76%68%112%55%60%60%10%20%25%Mob%3G%4Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Tellabs global study1 …The End-of-Profit.The end to the mobile-only business model as we know it?Mobile carrier study“End-to-Profit” (Tellabs study).BusinessmodelbreakdownMounting cashpressure• Risk of End-of-Profit next 5 years?• Un-managed mobile data demand.•Short-term price-plans wo long-term view.What can be learned?Causes:- Modernization pressure.- Exponential data growth.- Capacity Crunch.- Need for more spectrum.- LTE introduction.- Revenue slow down.- Decline of legacy business.- Increased competition as marketsaturate.- Increased cost.5Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Europe 2020 … A soft landing?Europe Mobile RevenueEurope Mobile OpexEurope Mobile Ebitda20082002202037%38%Just prior to crisis200535%31%38%2010-15%+15%CAGR 0.8%CAGR 1.9%Total RevenueTechnology Cost (ca. 15% – 20%)Usage Cost−Market Invest SAC & SRC−= EBITDA (WEU ca. 37% 1)Personnel CostOther Cost−−−Network Depreciation−Spectrum Amortization−Capex (new rollout < +10+% of Revenue)−1 BoA ML Global Wireless Matrix 1Q11, margin data for 4Q 2010.Spectrum invest (0.8 – 0.05 € per MHz-Pop)−Red color represent Technology driven cost+ New Revenue?Defend philosophy!Stop / Slow Revenue DeclineNew business!?QoS, LTE, IoT, Media, FMC, …Efficiency gameOptimize: Defend / SlowEbitda DeclineIncreased cash pressureNew technology /ModernizeThe Hunt for $30+Bn1.9%0.8%CAGR 13%Max 30+%6Dr. Kim Kyllesbech Larsen , Network Sharing Fundamentals.
    • Mobile broadband journey … be prepared.The lessons learned from mature markets.Messaging revenue decline (particular for Smartphones & OTT)Voice revenue decline (faster than data revenue uptake)Cash and margin pressure from new technology introduction.7Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • TransformorPerish8Dr. Kim Kyllesbech Larsen, , Network Sharing Fundamentals..
    • So why should you share your network?9Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Going Dutch – converging to “The rule of Three”. Initial discussion with Orange NL started in mid-2001. JV operational from mid 2002 to 2004.- Site & ancillary sharing.- Common plan & build organization.- No common procurement. JV closed down in YE 2004.- Staff resistance (them vs us)- Different strategic objectives.- TMNL decides no need for ancillary sharing.- More economical to share own infrastructure than common. Oct 2007 T-Mobile acquire Orange; network consolidation started. Nov 2008 all Orange customers were migrated to T-Mobile’s radio network2001 - 2004: 3G sharing – Capex avoidance strategy.13Kim KyllesbechLarsen, TechnologyEconomics– Deutsche TelecomKim KyllesbechLarsen, Technology- T-Mobile. 15T-Mobile US – Cingular – The GSM Factory. Geographical GSM RAN sharing agreement. T-Mobile US (via JV) responsible for NYC Metro areas. Population ca. 22+M #Base Stations ca. 2,300 (at time of breakup). Cingular (via JV) responsible for California/Nevada areas. Population ca. 40+M (TMUS had 1.7M subs @ breakup in CA/NV) #Base Stations ca. 5,000 (at time of breakup). Venture discontinued in 2004 with Cingular – AT&T Wireless merger. TMUS pays (net) $2.3B for California/Nevada + add spectrum optionality. TMUS forced to spin-off 10MHz in NYC Metro markets (very painful!). Nationwide roaming agreement.2001 – 2004: Regional GSM Sharing JV.Deutsche Telekom sharing examples (1 of 4).T-Mobile– Orange NL merger… 2008 – 2009. Price of Orange NL was ca. €1.3B or ca. €600 per customer. One single network by 2010 with- Ca. 5,000 fewer radio nodes and- Ca.3,300 (ca. 50%) fewer site locations. Securing future competitive growth. leveraging on higher spectral efficiency by consolidating. On track to deliver synergies in excess of €1+B by 2013 (in time & money).14Kim Kyllesbech Larsen, Technology Economics – Deutsche Telecom2008 Acquisition.TMUK – H3G 3G RAN sharing – more for less.2007: Joint venture design, plan & build-co MBNL Ltd. TMUK adds 3,000 – 5,000 3G Node-Bs that would otherwise not have beenfinancially/economical feasible. Common 3G plan & build organization (MBNL Ltd). Positive TMUK EBITDA net of £50m (ca. 4% “run-rate” avoidance).– H3G benefits from faster and much more efficient deployment . Positive annual Capex benefit of £79m by 2012 (18% “run-rate” avoidance).– H3G capital benefits far in excess of £0.5B (estimated saving & avoidance). Substantial site lease cost savings and cash prevention expected.– From 2011 and onwards.16Kim Kyllesbech Larsen, Technology Economics – Deutsche TelecomT-Mobile– Orange UK Network JV. 1 single network by 2014ish with 30%-40% denser grid than standalone.- Starting point a network of 14,000 sites, today the end-game is 18,500. Total 9,000 site locations will be terminated (33% reduction) Leveraging higher spectral efficiency by consolidation. Large and readily achievable synergies in both Network & IT. Significant synergies with NPV in excess of £3.5 bn.- Opex run-rate synergies ca. 35% (on relevant cost!)- Capex “run-rate” synergies up-to 25%. Integration & termination cost of up-to £1.2 bn. EE has the BIGGEST mobile network(s) in UK which will remain so evenafter consolidation and integration has been finalized.2009: EE Network (ad)Venture – The BIGGEST Network in UK!17Kim Kyllesbech Larsen, Technology Economics – Deutsche Telecom10Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Deutsche Telekom sharing examples (2 of 4).Going Dutch – converging to “The rule of Three”. Initial discussion with Orange NL started in mid-2001. JV operational from mid 2002 to 2004.- Site & ancillary sharing.- Common plan & build organization.- No common procurement. JV closed down in YE 2004.- Staff resistance (them vs us)- Different strategic objectives.- TMNL decides no need for ancillary sharing.- More economical to share own infrastructure than common. Oct 2007 T-Mobile acquire Orange; network consolidation started. Nov 2008 all Orange customers were migrated to T-Mobile’s radio network2001 - 2004: 3G sharing – Capex avoidance strategy.13Kim KyllesbechLarsen, TechnologyEconomics– Deutsche TelecomT-Mobile– Orange NL merger… 2008 – 2009. Price of Orange NL was ca. €1.3B or ca. €600 per customer. One single network by 2010 with- Ca. 5,000 fewer radio nodes and- Ca.3,300 (ca. 50%) fewer site locations. Securing future competitive growth. leveraging on higher spectral efficiency by consolidating. On track to deliver synergies in excess of €1+B by 2013 (in time & money).14Kim Kyllesbech Larsen, Technology Economics – Deutsche Telecom2008 Acquisition.11Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Kim KyllesbechLarsen, Technology- T-Mobile. 15T-Mobile US – Cingular – The GSM Factory. Geographical GSM RAN sharing agreement. T-Mobile US (via JV) responsible for NYC Metro areas. Population ca. 22+M #Base Stations ca. 2,300 (at time of breakup). Cingular (via JV) responsible for California/Nevada areas. Population ca. 40+M (TMUS had 1.7M subs @ breakup in CA/NV) #Base Stations ca. 5,000 (at time of breakup). Venture discontinued in 2004 with Cingular – AT&T Wireless merger. TMUS pays (net) $2.3B for California/Nevada + add spectrum optionality. TMUS forced to spin-off 10MHz in NYC Metro markets (very painful!). Nationwide roaming agreement.2001 – 2004: Regional GSM Sharing JV.Deutsche Telekom sharing examples (3 of 4).12Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Deutsche Telekom sharing examples (4 of 4).TMUK – H3G 3G RAN sharing – more for less.2007: Joint venture design, plan & build-co MBNL Ltd. TMUK adds 3,000 – 5,000 3G Node-Bs that would otherwise not have beenfinancially/economical feasible. Common 3G plan & build organization (MBNL Ltd). Positive TMUK EBITDA net of £50m (ca. 4% “run-rate” avoidance).– H3G benefits from faster and much more efficient deployment . Positive annual Capex benefit of £79m by 2012 (18% “run-rate” avoidance).– H3G capital benefits far in excess of £0.5B (estimated saving & avoidance). Substantial site lease cost savings and cash prevention expected.– From 2011 and onwards.16Kim Kyllesbech Larsen, Technology Economics – Deutsche TelecomT-Mobile– Orange UK Network JV. 1 single network by 2014ish with 30%-40% denser grid than standalone.- Starting point a network of 14,000 sites, today the end-game is 18,500. Total 9,000 site locations will be terminated (33% reduction) Leveraging higher spectral efficiency by consolidation. Large and readily achievable synergies in both Network & IT. Significant synergies with NPV in excess of £3.5 bn.- Opex run-rate synergies ca. 35% (on relevant cost!)- Capex “run-rate” synergies up-to 25%. Integration & termination cost of up-to £1.2 bn. EE has the BIGGEST mobile network(s) in UK which will remain so evenafter consolidation and integration has been finalized.2009: EE Network (ad)Venture – The BIGGEST Network in UK!17Kim Kyllesbech Larsen, Technology Economics – Deutsche Telecom13Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Vodafone sharing examples.Kim Kyllesbech Larsen, Technology - T-Mobile. 18Vodafone – Orange sharing … 2007. Rural Area / Geographical sharing. National roaming like sharing concept with joint field services. Rural areas with population of less than 25,000 pops. Ca. 1,500 Node-Bs where shared by YE2007 with max 5,000 by YE2009. Venture frozen in 2009 as VF announced sharing deal with Telefonica.Network sharing agreement in Spain and Romania.(i.e., VF-Europe Opex in 2008 was £16.4 bn and TF-Europe 2008 Opex was in the order of £13 bn).Kim Kyllesbech Larsen, Technology - T-Mobile. 19Vodafone – Telefonica sharing … 2008. Passive RAN network site sharing. Traffic managed independently of each other. Customers expected to benefit from improved coverage. Benefits in the order of ”hundreds of million” £ for both over next 10 years. Today (May 2012) they share 4,000 site locations.Network sharing agreements for Germany, Ireland and the UKwith detailed discussions ongoing in the Czech Republic.(i.e., VF-Europe Opex in 2008 was £16.4 bn and TF-Europe 2008 Opex was in the order of £13 bn).Vodafone – Telefonica sharing … 2012. Passive sharing including backhaul. Common Build JV, planning & design separately. 1 single network by 2015 with doubling the site count to standalone.- Each has ca. 10,300 sites today with shared end-game of 18,500. Total of ca. 2,000+ site locations will be terminated (10% reduction). Geographical (50%-50%) sharing (i.e., London halved). No Frequency sharing. Individual supplier relationships (missing out on procurement scale?). Massive Opex and Capex avoidance. This is NOT an Opex reduction game but rather matching EE super-grid.Getting a lot more for less …. Capex & Opex avoidance.20Kim Kyllesbech Larsen, Technology Economics – Deutsche Telecom14Dr. Kim Kyllesbech Larsen
    • The Good and The Ugly.Recipe for successful merger (or network sharing) and is matching technologylandscape and strategic outlook. Matching spectrum position and network grid aremuch more valuable (short-term) for synergies than complementary spectrum.Sprint - NextelAT&T – Cingular mergerMatching technology landscape and strategic outlook.Good complementary spectrum (high grid match).Fairly symmetric & matching business structures andmodels.Mismatch in technology landscape & strategic outlook.Complementary spectrum but relative low grid match.Very different business structures and models.Dominated by Nextel15Dr. Kim Kyllesbech Larsen
    • Expectation management – the full sharing potential.Total Opex100%Technology OpexNT 14%RANsavingRAN 7%Cluster Opex40%IllustrationExpect up-to 35% saving on Tech OpexUp-to 5% on Total Corporate OpexTermination cost 1.5 – 3+ × of Opex savingsIntegration Capex synergetic with BaU CapexInstant Cell split potential Enhanced CapacitySpectral efficiency gains (>10%+)16Dr. Kim Kyllesbech Larsen
    • Rollout PhaseUK: 3G T-Mobile – 3 UKSteady StateUK. T-Mobile UK – Orange JV (EE Ltd).Stages of sharing benefits.The best sharing strategy depends on the business cycle andtechnology age. High Capex prevention. Opex prevention. Cash optimized startup. Best network. Little Capex benefits. Opex savings. Significant write-off. High re-structuring cost. Extended coverage. High Capex prevention. Opex savings. Minor write-off. Re-structuring cost. Instant cell split. Better network.< 5 years 5+ yearsUMTS - GSMLTE> 5+ yearsUMTSPassive sharing: Site Lease & Civil Works,Mast/Tower sharing, Ancillary & Rack sharing, and Backhaul Sharing.Active sharing: e.g., Frequencies, TRXs, PAs, Baseband, CPU, ports, ….ModernizationPoland: PTC – Orange incl. LTEGSM – UMTS(LTE piggybacking)Illustration17Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Restructure costcan besignificant.Although contracttermination canbe less costlydue to longeroperationalperiod.Termination•Site lease.•Site restoration.•ServiceContracts.•Personnel costOther•JV overhead•Legal, etc..Restructuringcost can be low iflittle legacyinfrastructure ispresent.If decision fornetwork sharingis taken in therenewal /obsolescencephase write-offexposure can berelative light bothfor equipmentand site-build.As most of thenetwork hasbeen deployed atthis stage thewrite-offexposure can besignificant even ifequipment canbe re-used.Relative lowexposure if littlelegacyinfrastructure ispresent.Economics of RAN sharing benefits.Rollout PhaseBulk (>80%) of sitesand nodes to bedeployed.Steady State80% of coverage andsites deployed. Mainlycapacity additions andcoverage maintenance.Modernization/ObsolescenceActive element / nodereplacement,technology migration.Site consolidation.Passive sharing• Site build• Mast• Rack / AncillaryActive sharing• MW/Fiber• Electronics• Spectrum• ResourcesPassive sharingLow Capex levelActive sharingPassive sharingMedium Capex levelActive sharingSubstantial CapexCapex Synergy= Low = HighSynergy potentialOpex prevention• Site lease• Non-telco services• Telco services• Energy• ResourcesOpex saving ifabsolute numberof site locationsare reduced.Primarily Opexprevention incase of sitenumberexpansion.Opex saving ifabsolute numberof site locationsare reduced.Primarily Opexprevention incase of sitenumberexpansion.OPEX SynergySharing stages Restructure Cost= Low = HighCost exposureWrite-offIllustration18Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • 100%50%0%Sites0%20%40%60%80%100%CumulatedRevenue(Traffic)The ugly tail … the low profitability areas.Should drive sharing in low-traffic areas50% revenue ≈ 10% sitesLow profitabilitysitesTop 30% sites ≈ 80% revenue.50% sites takesless than 10% revenueIllustrationRural-like areasSub-urbanUrban19Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Frequency(MHz)Site(acq. + build)Radio(electronics)Backhaul(transport)Backbone(transport)Core(switch & control)BSS(bill & care)CapexpreventionEfficiencyenabler40%-60% < 35% up-to 50% up-to 50%PartlypossibleLess likelyOpexpreventionEfficiencyenabler< 35% ca. 35%scalediscountscalediscountPartlypossibleLess likelyRegulatorycomplexityHIGH LOW LOWER LOWER LOWER HIGH HIGHNetwork Sharing can provide better economics andmarket timing …BTS &NODE-BeNodeBBSSBSSMNO 1CoreMNO 2Coreplmn 1plmn 2plmn 1 + plmn 2(optional)20Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Anatomy of network sharing.RAN sharing guaranties competitive differentiation, operatorindependency and vast consumer quality improvements.• Sharing: Costly Radio Access Network infrastructure will be shared,• Not shared: All core network and service infrastructures that provides respectivecustomers with differentiated services, applications, handsets, rate plans, etc.• Result: A network with greater capacity (i.e., instant cell split) and improved coverage.21Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Network Sharing StrategiesNetwork sharing.A mean to close the mobile broadband coverage gap (in CEE).Substantial improvedcoverage, capacity boost andquality of services tothe consumer at a Quality LevelNOTeconomical viable in standalone.Safe for Service by Sharing.22Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.• Opex avoidance & savings.• Substantial Capex avoidance.• Shared Modernization.• Shared LTE deployment.• A Much better network.Benefits.UMTSGSM2G, 3G & LTE RAN incl. BACKHAUL SHARECORE CORESERVICES SERVICESBILL PRICE BRAND SALES BILL PRICE BRAND SALESRural areas1LTE SHARING800, 2100 & 2600 MHzGSM900 & 1800GSM900 & 18002G, 3G & LTE RAN incl. BACKHAUL SHARECORE CORESERVICES SERVICESBILL PRICE BRAND SALES BILL PRICE BRAND SALESUrban areas1UMTS900 & 2100Note: frequency bands not to scale!SHAREDOperator A Operator B1 Note sharing spectrum between two (or more) MNOs might not be regulatory allowed.Idealized IllustrationLTE
    • Network sharing flavors …Capacity limited Coverage limited Rural Passive sharing. shared transport (possible). Independent frequencies. Active sharing (MOCN1) Shared transport. Frequencies sharing. Geographic sharing. One frequency sufficient. Wholesale/cost-sharing.,HLRHSSCore CoreHSSShared site and passivesIndependent BTS, NB, eNB.BSCRNCBSCRNCHLRHSS HSSShared Radio, aggregation& frequencies (optional).CoreCoreBSCRNC1 Multi-Operator Core Network supporting RAN Sharing, (*) For LTE there is no BSC/RNC, core networks connected directly to the eNode-B.Site sharing (*) RAN Sharing (*) National Roaming (*)HLRHSS HSSBSCRNCBSCRNCCore CoreWholesale arrangement,geographical partnership.23Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Common Frequency Sharing…Solution for low-demand, rural areas and symmetric demand scenarios.Frequency pooling (*)HLRHLR 1 operator share itsspectrum with others. Multiple operators pool theirspectrum assets togetherand share total spectrum.HLRShared Freq., Radio & aggregation.CoreCore1 MORAN = Multi-Operator Radio Access Network sharing of all active electronics with exception offrequencies. 2 MOCN = Multi-Operator Core Network = two core networks connected to 1 frequency. (*) For3G network core networks connect to the RNC that then connects to the Node-B....... 3GPP Release 8, 2009 (earliest) onwards with the following sharingconcepts: Gateway Core Network (GWCN) shared core network (CN) (multiple CNsconnected to a common core, connected to the shared RAN). MOCN: Multi-Operator Core Network where only the RAN is shared (i.e.,NO common CN). Introduction of Iu Flex allowing multiple CNs connecting to shared RAN. Multiple core networks connected to a common radio accessnetwork (RAN) sharing a single frequency or a pool of frequencies. Service requirements & capabilities not limited by the sharingrequirements (i.e., resides in core network or service creationplatforms above the core network). Requires user equipment support (i.e., R8 or later). Non-supporting user equipment will ignore the broadcast systeminformation related to sharing functionality. Fairly complex coordination issues on resource allocation amongsharing parties, making this concept more interesting for low-trafficrural areas (where demand is no issue) or highly asymmetrictraffic situations.Shared IPbackhauleNode-BLTE24Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Network components mapped to network layers.The deeper into the network infrastructure is shared the more the sharingconcept will appear as a merger or NetCo concept.Radio AccessNetworkCS & PSNetworkVASNetworkSignalingNetworkIT & CSNetwork Spectrum /Frequencies GSM BTS GSM BSC GSM TRX 3G Node-B 3G RNC 3G Carrier & Channelelements e-Node-B (LTE RAN) Backhaul (MW & LL) Routers, switches andmultiplexing SW Licenses &features. NMS & operations. Etc. Classical MSC/VLR R4 MSC Server &Gateway Multiplexing GGSN & SGSN(packet core). Evolved Packet Core. IP networks (routers,FW, etc..) Backbone transport Interconnect NMS & operations. Etc. Classical HLR NG HLR IN platform Interconnect NMS & operations Etc. SMSC MMSC VMS WAP Portals 3rd party content NMS & operations Etc… Billing system Rating Mediation CRM SAP/Financesystems. Business Intelligence. Call center systems(call routing, ..) OSS IT Operations. Etc.Note: above categorization is guiding but not fully un-ambiguous.Network SharingNetwork Merger – Netco concept25Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Why one should NOT commence Network Sharing.2 out of 3 NS deals considered are put on ice again!Divest / Spin-off / mergervery complexComplex GovernanceTechnology mismatch26Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Rural Tower & RAN Sharing scenario (illustration)Doing much more for a lot less refocus cash on areas that mattersDismantling of surplusTower locations650 SRAN(new)Shared SingleRAN deployment650 SRANSharedMNO1650 TowersConsolidatedMNO2TowerJV500 Towers 500 Towers0 Node-B500 old BTSxx% geo coverage yy% geo coverage0 Node-B500 old BTSNo Re-useConsolidation HarmonizationToday+1.5–2 YearsTowers JV (IPO optionality) Single RAN Sharing (NetCo).MoreRANSharedbackboneSharedbackhaulMoreTowersNodeBBTSMNO2CNRNCBSCMuch better & efficient network!End-game: 1,000 TowersMNO1CN-35035%1,000 TowersConsolidated1,000 SRAN(LTE option) End-gameHigh Capex Synergies (>50%)by Joint procurement!Real Opex saving! Opex equivalent to 500 Towers (1+1 “=“ ½). Better quality & more capacity (1 + 1 > 2 effect). Favorable cash impact compared to standaloneRural & Sub-urbanCoverage focus ensureconfigurationally &operational simplicityHigh Capex & Opexavoidance, highROCENo frequency sharing!27Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • 3-party rural network sharing (illustration only)Doing much more for a lot less optimizing cash and margin.Dismantling ofsurplus Towerlocations800 SRAN LTEupgrades (new)Shared Single RANdeployment800 SRAN2&3G + LTEB800 TowersConsolidatedCShared350 Towers 440 Towers800 SRAN2&3G NodesConsolidation Harmonization20122014Towers (Rural – Sub-urban Areas). Single RAN (SRAN) Sharing.LessRANSharedbackboneSharedBackhaulFewerTowersNodeBBTSA CNRNCBSCOptimized targetEnd-game: 1,000 TowersB CN-590~40%1,000 TowersConsolidated1,000 SRANMulti-mode End-gameA600 Towers 350 SRAN2&3G440 2G & 3GLegacy nodes600 SRAN2&3GC CNeNodeB• 800 Towers shared by 3.• 800 whilst effective paying for 267(1+1+1 “=“ 1/3).• Improved network with 33% to130% increase in sites.• Much improved TCO and ROI.• Low LTE entry cost and futuremodernization cost.28Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • National Roaming boils down to 3 majorconsiderations.No Coverage / No Network.Wholesale Tariff better economicsthan Network Cost & Invest.Long rollout lead-timeNational Roaming a timing-bridge.Under-utilized network.(“plenty” of capacity)Wholesale revenue at no orvery little additional Cost and Invest.Wholesale income more attractivethan risk of competitor network access.GUEST HOST29Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Profit & Loss … what to expectRevenueTechnology CostUsage Cost−Market Invest SAC & SRC−= EBITDAPersonnel CostOther Cost−−−Network Depreciation−Spectrum Amortization−Capex−Spectrum invest−Red color represent Technology driven costRevenueTechnology CostUsage Cost−Market Invest SAC & SRC−= EBITDAPersonnel CostOther Cost−−−Network Depreciation−Spectrum Amortization−Capex−Spectrum invest−Red color represent Technology driven costNetwork SharingStandaloneRevenueTechnology CostUsage Cost−Market Invest SAC & SRC−= EBITDAPersonnel CostOther Cost−−−Network Depreciation−Spectrum Amortization−Capex−Spectrum invest−Red color represent Technology driven costNational RoamingCapex preventiontypically re-prioritized.Opex savings &preventionPersonnel savings byresource sharing.Less depreciation(& some write-off)High usage cost jvf.Wholesale agreementPersonnel savings byredundancies.Capex prevention.Low depreciation charges(typically high write-off).Higher Opex savings &preventionIt is far from obvious that National Roaming should be more economical thanNetwork Sharing … Structurally it is more complex to get right.30Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • National roaming … another way of sharing.Why National Roaming?• 1 party has coverage, the other not.• per Technology (i.e., GSM-only, UMTS-only, …).• Different regional spectrum positions.• Contiguous well-defined network (e.g., 50 to 100s of radionodes).• Often geographical splits• Can also apply to infrastructure network sharing.• Time to market.• Customer experience can be controlled independently byRoamer.• Capacity is not an issue for the hosting MNO.• Attractive economics compared to building network:• Provides very similar benefits to infrastructure sharing.• Roaming MNO gets Capex & Opex avoidance, but will have costassociated with traffic on Hosting network.• Hosting MNO gets wholesale revenue typically in low-traffic areas withlow or no profitability (i.e., increased utilization & efficiency).• Regulatory encouragement (or enforcement).• Relationships tends to be of temporary nature.• 2G & 3G National Roaming are standardized with workingtechnical solutions used in several countries between MNO andMVNO.Typical Rural Geographic sharing. One frequency sufficient. Wholesale/cost-sharing.,(*) For LTE there is no BSC/RNC, core networks connected directly to the eNode-B possibly via IP aggregation & switching.National Roaming (*)HLRHSS HSSBSCRNCBSCRNCCore CoreWholesale arrangement,geographical partnership.OpCo1 Host to OpCo 2 OpCo2 Host to OpCo131Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • National roaming … many case stories around the world! Geographic sharing. One frequency sufficient. Wholesale/cost-sharing.,(*) For LTE there is no BSC/RNC, core networksconnected directly to the eNode-B possibly via IPaggregation & switching.Typical RuralNational Roaming (*)HLRHSS HSSBSCRNCBSCRNCCore CoreWholesale arrangement,geographical partnership.OpCo1 Host to OpCo 2 OpCo2 Host to OpCo1I have found2 no examples where an MNOdecommissioned its network for national roaming.1 Note both AT&T and VERIZON was very much against this FCC ruling as the correctly pointed out that it is very difficult to control & plan for mobile datatraffic and that they were already spectrum constrained and therefore do not have excess capacity. 2 Though I have been part of discussions entertainingsuch an idea.Some examples;• T-Mobile US (New York) & Cingular (California) – Terminated.• T-Mobile US 2G roaming on AT&Ts network - Active.• T-Mobile US 3G roaming on AT&Ts network – Not operational (too complex).• FCC (US Regulator) issued a ruling (2011) requiring MNOs to sign mobile datanational roaming1 agreements with anyone who asks (at reasonable terms &conditions … last not been specified by FCC).• T-Mobile Austria on Hutch 3G network in rural areas – Active.• Hutch on T-Mobile Austria’s GSM network – Active (decreasing)• H3G UK on Orange GSM – Active (decreasing).• O2 Germany, 2G national roaming on Deutsche Telekom GSM network outside theirown 2G coverage (particular rural and sub-urban areas) – Terminated.• T-Mobile UK and Orange UK mutual national roaming on each other’s 2G networksextending the coverage for both customer bases – Active.• Free Mobile (Iliad) in France has a national roaming agreement with Orange. Thisagreement covers both 2G and 3G – Active.• India is likewise (in)famous for many 2G (“3G”) national roaming deals between theas many mobile MNOs – Active (3G still a regulatory issue).
    • National roaming … can be a flawed business logic!Why maybe not?• Firstly, complexity is not so much in the technical area but very much contractual and ensuringsufficient risk mitigation against operational disruption.• Regulatory & competition authority issues• If MNOs setup mutual agreements, Regulator might enforce those agreements onto other interestedparties (i.e., see 2011 FCC Ruling).• Further Regulator might decide non-compliance with spectrum utilization or conditions of theroaming party (i.e., its spectrum is no longer in use).• Decommissioning of existing infrastructure and investments (i.e., write-offs).• MNOs could financial compensate each other if decom infrastructure would be taken into use byHosting MNO.• Operational risk of relying 100% on the other partners network.• Compared with network sharing that provides for co-ownership & co-control of network.• Can be mitigated to some extend in contract and by choosing symmetric areas (i.e., ensuringsymmetric threat levels)• Can carry very substantial operational risks.• Change of ownership.• Bankruptcy.• QoS & Customer Experience guaranty for 3G mobile data usage very difficult & carries great mutualrisks.• Change of mind / contractual (even illegal) break-up or non-compliance.• Tends to be very complex commercial negotiations, resulting contracts, processes andprocedures.33Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Profitability & cash crunch.Incumbent spectrum crunch.MVNO / tier-2&3 MNO appetite.Other business models …LTE as a Service.Enablers.Emerging business models – LTE network factoryAttractive (startup) cost economics.Relative low Capex – cash optimized.Increased spectral efficiency & utilization.Provides.Option:Small cell centricstartup andCapacity as aService.Cashoptimizedstartup viavirtualization& OTTbasedservices.34Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Regulatory support.Spare Spectrum (i.e., typical Startup).MNO & MVNO appetite.Other business models … ultra-efficient transformation.Enablers.Emerging business models – piggybacking on Virtualization & CloudData-only QoS transparent network.Network services to MNO & MVNO.Dedicated OTT network services.Provides.3rd partiesdelivers BSS /OSS cloudservices toSmartCo (off-the-shelf)3rd party, media companies,MNO/MVNO CDN & SDNs.3rd parties(supplier)delivers corenetworkfunctionality(i.e., HSS,PCRF, etc..)35Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Technology cost and synergy potential.IllustrationSynergy potentialMobile ONLYShare ofTechnology OpexManaged services Network sharingNT FTE Ca. 10% Typical 20%HC reductionTypically CapexcommitmentMin. 20% - 35%NT Services Ca. 15%>35% but depends onnetwork reduction.Rental & Leasing Ca. 25% - 30%Good savingspotential, though riskfor future sharingoptionality>35% but depends onnetwork reduction.TransmissionCa. 5% - 10%(can be a lot higher if majorityleased transport)Opex – Capextrade-offMore Opex – Capextrade-offIT FTE 5%10% - 20%HC reductionOpex – Capextrade-offsMinor opportunities<10% due to scale.IT Services 25%Minor opportunities<10% due to scale.Other 10% - 15% Minimum 10% pa At least 35%€€€ (€)€€ (€)Note: Above numbers serve as illustrations only. Different operations may have different Technology Opex distributions..36Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Key messages.What we need to be passionate about!Network sharing provides cost reduction & increased quality.Utilize technology to achieve the best operational performanceSharing models for mobile applies to fixed broadband as well.& don’t forget!Maybe Even more so!& increased complexityRRH, SDR RAN, Single-RAN, FTTS, Virtualization, Cloud, …& upfront cash needsdon’t over-focus on financial savings!First things first37Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Key elements for successful network sharingCEOs agree with & endorse Network Sharing.Sharing Partners have similar perceived benefits (win-win feel).Focus on creating a better network for less.Both parties share a similar end-goal and similar strategic outlook.38Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • Last but not least.Do consider that break-up can happen … and be prepared! (“legal stuff”)Network sharing is a very long term engagement (“for Life”!)39Dr. Kim Kyllesbech Larsen, Network Sharing Fundamentals.
    • The key value proposition of a mobile networkis ....Freedom& Mobility