Mobile Network Sharing Report 2010-2015 - Developments, Analysis & Forecasts

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Mobile Network Sharing Report 2010-2015 - Developments, Analysis
& Forecasts
Published on March 2010

Report Summary

Changes in data demand growth and availability of new technologies like LTE is having implications on the telecom industry's
structure, competition and sources of competitive advantage. In addition, due to increasing competition, network operators are
witnessing faltering profit margins. Service revenue growth is expected to be less than 1.2% up until 2014. In such harsh economic
conditions, operators are now increasingly looking for innovative ways to increase operating profits, reduce their total cost of
ownership and create shareholder value. In order to achieve the above objectives, many in the industry believe that operators should
master the value discipline of "operational excellence" by embarking on a network sharing strategy.

Network sharing is an approach where two or more competitor network operators share their network resources. The degree and
method of sharing can vary from country to country depending on regulatory and competitive landscapes. Co-operation in the form of
network sharing or infrastructure sharing brings a ray of hope for operators who want to continue to remain dominant market players.
Sharing strategies work on game theory idea of identifying when the outcome of co-operation is actually better than the one of
sustaining direct rivalry.

The prime objectives of network sharing must not only be to realise Capex and OpEx savings but also to offer highest level of network
quality to the customers of all sharing partners. Network sharing by no means should lead to deterioration of network quality. Only
then can operators retain their customers and provide differentiated services

Operators are aware that infrastructure sharing offers opportunity for product innovation and improved customer services. Around
70% of operators have used sharing to their advantage in forms such as site sharing, co-location and national roaming in the
liberalised and emerging markets. However, advanced sharing concepts are now emerging and operators must take benefits of the
new CapEx/OpEx saving opportunities.

Our Research suggests that:

For the majority of operators, network sharing will become a critical strategy to survive in the market. This will help them to expand 3G
coverage and make utilisation of the OpEx savings in number of other areas such as LTE and IMS. By 2015, as many as 90% of
operators across the globe will implement network sharing of some form.

This exclusive report offers operators a clear understanding of, and clarity around, what network sharing represents. Operators should
not just take a fragmented view, they should take into consideration the overall business needs and cost structures while defining their
network sharing strategies.

This exclusive management report provides:

' A framework for operators to identify objectives and strategies for designing their network sharing strategies; and
' A detailed roadmap for operators considering network sharing.

Several large operators in Western Europe like Telefonica and Vodafone have taken a leap in active network sharing. Operators in
developing markets are now forging alliances for network sharing that would help improve their coverage without incurring prohibiting

Mobile Network Sharing Report 2010-2015 - Developments, Analysis & Forecasts Page 1/12


costs.

Active network sharing is gaining importance in the telecom industry. By the end of 2009, many new sharing deals were signed. The
newer deals being signed across the globe are larger than previous deals in terms of network size, scope and number of subscribers
involved. However, sharing is a new concept and requires significant due diligence.

In the UK, given the regulatory pressure to cover the entire population by 2012, operators such as Vodafone and O2 plan to pool their
networks. T-Mobile and 3 also signed deals on network sharing. All companies will continue to compete under their own brand
names, but putting together their networks will allow them to push mobile broadband into more rural areas and should allow them to
reduce the 51,000 base stations dotted across the country by eliminating duplication.

What questions does the report answer'

This report will answer the following questions:
' What are the market drivers' What are the current problems faced by operators that network sharing can help minimise'
' What are the benefits associated with network sharing'
' Is network sharing as a concept working'
' How is the speed of problem resolution achieved with network sharing'
' Which operators have adopted network sharing'
' What is the market opportunity in network sharing for vendors'
' What are the implications for operators who embrace network sharing and how does affect their position on the value chain'
' What are the benefits, challenges and barriers' Are there any negatives to be considered when embracing network sharing'

Who should read this report'

Although this report attempts to address all key aspects associated with the network sharing, it is not a legal, technical or financial
document. The report is aimed at executives who want to gain an overview of the network sharing market and its potential.
' Operators
' Vendors
' Analysts
' Consultants
' MNVOs
' New Entrants
' Tower Management companies

Why you should buy this report'

This report will act as a guide for:
' Operators to make informed discussions before embarking on network sharing strategy.
' Vendors can analyse the current issues facing operators in network sharing domain and gain an insight into other vendors' strategies
and compare various solutions on the market. The report helps vendors to identify the types of operators likely to embark on a
network sharing strategy.
' Consultancy companies can look into the opportunities in the network sharing domain, such as assisting operators to formulate
effective sharing strategies.
' Tower management companies can look into the possibilities of expanding their business further.
' Operators can look into the area of wholesale business with network sharing.
' New Entrants can evaluate the MNVO opportunities with Network sharing in major markets.



Table of Content

Table of Contents

Executive Summary
E1: New Rule of the Game: Co-opetition
E2: Is Sharing a Viable Strategy'
E3: Network Sharing is not Fail-proof
E4: Current Status of Network Sharing
E5: Impact of Recession on Network Sharing
E6: Future of Network Sharing
E7: Market Trends

1. Introduction
1.1 Operational Excellence
Figure 1: Operational Excellence Value Discipline
1.2 What is Network Sharing'
Figure 2: Evolving Operator Value Chain with Network Sharing
1.3 Network Sharing in Broader Context
1.4 Drivers for Network Sharing
Table 1: Factors Fuelling the Growth of Network Sharing
1.4.1 Increasing Cost of Passive Network Elements
Chart 1: Cost of Passive Network Elements (2007- 2015)
1.4.2 Success of MNVO's
1.4.3 Flattening Growth
1.4.4 Focus on Relationship Marketing
1.4.5 Need for Rapid Deployment of new Access Technologies
1.4.6 Capacity Requirement for Mobile Broadband
1.4.7 GSM in Maturity Phase
1.4.8 Improving the 3G Coverage Requires Significant Investments and Time
1.4.9 Scare Spectrum
Table 2: Spectrum Issues
1.4.10 Environmental Aspects
1.4.11 High Deployment Cost for Rural Sites
1.4.12 Sharing as a Strategy to Recoup Sunk Investments
1.4.13 Managing Customer Expectations
Chart 2: Mobile Broadband Penetration (2009-2015)
1.5 Aim of the Report
1.5.1 Questions Answered by this Report
1.5.2 Framework for Devising Successful Network Sharing Strategies
Figure 3: Network Sharing Framework
1.6 Report Structure
1.7 Report Scope

2. What is Strategic Network Sharing'
2.1 Activities that come under Infrastructure Sharing
Table 3: Cell Site Infrastructure
Table 4: Infrastructure Sharing Possibilities



2.2 Types of Infrastructure Sharing
2.2.1 Passive Infrastructure Sharing
2.2.1.1 Site Sharing
Table 5: Site Sharing Propositions
Figure 4: Site Sharing
Table 6: Technical Prerequisites for Site and Tower Sharing
2.2.1.2 Tower Sharing
Table 7: Tower Sharing Propositions
2.2.1.1.1 Tower Management Companies
2.2.2 Active Infrastructure Sharing
Figure 5: Active Network Sharing
2.2.2.1 Spectrum Sharing
2.2.2.2 Antenna Sharing
2.2.2.3 Base Station Sharing
2.2.2.3.1 RAN Sharing
Figure 6: RAN Sharing
Table 8: RAN Sharing Propositions
Table 9: Technical Prerequisites for RAN Sharing
2.2.2.3.2 RNC Sharing
2.2.2.4 MSC and Routers sharing
2.2.2.5 Backhaul sharing
2.2.2.6 BTS and MSC Sharing
2.2.2.7 Roaming
2.2.2.8 MNVO
2.3 Characteristics of Network Sharing
Table 10: Characteristics of Network Sharing
2.4 Benefits of Network Sharing
2.4.1 Risk Share with Vendors
2.4.2 Reduce CapEx and OpEx
2.4.3 Improve Bottom-line
2.4.4 Maintain/Improve Network Quality
2.4.5 Manage Resources Effectively
2.4.6 Improve cash flow
2.4.7 Improve Business focus
2.4.8 New Opportunities for Incumbents to Increase Revenues
2.4.9 Network Sharing a Source of Cost Efficiency
Table 11: Benefits that can be realised across different areas of the value chain with Network Sharing
Table 12: Benefits of Network Sharing to Telecom Industry as a Whole
2.5 Risks with Network Sharing Strategy
2.6 Possible Challenges of Network Sharing Strategy
2.6.1 Need of Taller Towers
2.6.2 Sharing May Limit Competition
2.6.3 Network Sharing can be used by larger operators to Undermine their competitors
2.6.4 Need to use advanced Sharing Tools
2.6.5 Need for detailed Ground Work
2.6.6 Organisational Consequences
2.6.7 Sharing of Existing Infrastructure poses interworking challenges
2.6.8 Need to Identify the Role of Third Party Vendor
2.6.9 Risk of Losing Control
2.6.10 Significant Costs may be incurred in setting up Network Sharing



Table 13: Network Sharing Operational Execution and Implementation Costs

3. Industry/Resource/Internal firm based Considerations
3.1 Is Infrastructure Sharing Viable'
Figure 7: Viability of Network Sharing Strategy
3.2 Industry Specific Consideration
3.2.1 PEST Analysis
Table 14: Business Case for Network Sharing
3.2.2 Porter's Five Forces Analysis
Figure 8: Five Forces Analysis For Network Operators
3.2.3 Sector Analysis
3.2.3.1 Tier 2 Operators
3.2.3.2 Tier 1 Operators
3.2.3.2.1 Sharing offers a new Source of Revenue
3.2.3.3 Greenfield Operators
3.2.4 Region of Operation
3.2.4.1 Matured Markets
3.2.4.2 Developing Markets
3.2.5 Co-opetition (Collaboration among Rivals)
3.2.6 Regulatory Risks
Table 15: Regulatory Provisions for Network Sharing across Different Countries
Table 16: Regulatory Risks to Consider
3.2.6.1 China
3.2.6.2 UK
3.2.6.3 India
3.2.6.4 Norway
3.2.6.5 France
3.2.6.6 Sweden
3.2.6.7 Australia
3.3 Resource Specific Considerations
3.3.1 Tangible Resources
3.3.1.1 Network Infrastructure
3.3.1.2 Legacy Systems
3.3.1.3 GSM Networks
3.3.1.4 3G Networks
3.3.1.5 LTE Networks
3.3.2 Skilled Workforce
3.3.3 Analyse the Core Competence
Table 17: Internal Assessment for Network Sharing Strategy
Table 18: Benchmarking guidelines for Network Sharing Proposition
3.4 Firm Specific Considerations
3.4.1 Company's Culture
3.4.2 Key Stakeholders
Table 19: Critical Questions to Consider for Network Sharing Strategy
Table 20: Operator's Network Sharing Strategy and its Outcome

4. Critical Success Factors for Network Sharing
Figure 9: Successful Network Sharing Scenario
4.1 Designing Fail-proof Strategies
4.2 Design a compelling business case for all stakeholders



4.3 Select the best operating model for the deal
4.4 Regulatory Bodies should Play Positive Role
Table 21: Regulatory Factors Necessary for Successful Network Sharing Strategy
4.5 Building Flexibility, Scalability and Adaptability in the Networ Sharing

5. Business Case for Network Sharing
5.1 Analysing Economic Attractiveness of Network Sharing
Table 22: Economic Benefits from Network Sharing
5.1.1 Adopting Network Sharing will help in improving data ARPU
Chart 3: Voice and Data ARPU in the US
Chart 4: Data ARPU by Geography (2009)
Chart 5: Data ARPU by Geography (2015)
5.1.1.1 Developed Markets
5.1.1.2 Developing Markets
5.1.2 Network Sharing Will Manage CapEx
Chart 6: Wireless Capex (2007-2015)
Chart 7: European Operator's CapEx Breakdown
Figure 10: Network Sharing Savings Vs Complexity
5.1.2.1 Passive Sharing
Chart 8: Division of Cost between Active and Passive Network Elements (2015)
Chart 9: Savings in CapEx from Passive Sharing (2007-2015)
Chart 10: Savings in CapEx from Active Sharing
5.1.2.2 Active Sharing
5.1.2.3 Active Sharing agreements Signed by operators
5.1.2.3.1 Sweden's 3G sharing Model
5.1.2.3.2 Australia's active 3G sharing Model
5.1.3 Network Sharing will Reduce OpEx
Chart 11: OpEx Breakdown for an European Operator
5.1.4 Network Sharing will help in solving the Capacity Issues
5.1.4.1 Data Traffic Growth
Chart 12: Global Mobile Data Traffic Growth (2009-2015)
5.1.4.2 Data Subscribers
5.2 Network Sharing Market Overview
5.2.1 Technology perspective
5.2.1.1 GSM
5.2.1.2 3G
Chart 13: Global W-CDMA and GSM Subscriber Growth (2009-2015)
Chart 14: Global 3G Revenues (2009-2015)
5.2.1.3 LTE
Chart 15: LTE Operator Revenues (2009-2015)
Chart 16: LTE Subscriber Growth (2009-2015)
5.2.1.3.1 Cost of LTE Deployment
5.2.1.3.2 Network Sharing with LTE
5.2.1.3.3 4G Agreement in Sweden
5.2.2 Country Perspective
Table 23: Recent Sharing Agreements
Chart 17: Network Sharing Market Segmentation by Region (2015)
Chart 18 : CapEx breakdown by Region
5.2.2.1 UK
5.2.2.2 India



5.2.2.3 Afghanistan
5.2.2.4 China
5.2.2.5 Kenya
5.2.2.6 Turkey
5.2.2.7 Italy
5.2.2.8 HongKong
5.2.3 Operator's Perspective
Table 24: Operator List of Infrastructure Sharing Deals
5.2.3.1 Telefónica and Vodafone
5.2.3.2 T-Mobile and 3
5.2.3.3 Etisalat and Reliance Communications
5.2.4 Vendor's Perspective
Chart 19: Wireless Vendor Revenues (2008-2015)
5.2.4.1 Vendor Strategies
Chart 20: Percentage Increase in Operators opting for Managed Services (2009-2015)
Chart 21: Services Revenues for Key Vendors (2015)
Chart 22: Key Vendor Market Share in Managed Services (2015)
5.2.4.1.1 Ericsson
5.2.4.1.2 Nokia Siemens Network
5.2.4.1.3 Alcatel Lucent
5.2.4.1.4 Huawei
5.2.4.1.5 Arqiva
5.2.4.1.6 Crown Castle
5.2.4.1.7 Quippo
5.2.4.1.8 Mobiserveholding
5.2.4.1.9 Gridcom UK
5.2.4.1.10 Vanu Inc
5.3 Cost Benefit Analysis for Different types of sharing options
Table 25: Pro's and Con's of Different Sharing Scenario
5.3.1 Site and Tower Sharing
5.3.2 RAN Sharing
Chart 23: RAN sharing and Associated Savings for Network Operators
5.3.3 Backhaul Sharing
Chart 24: Backhaul CapEx savings with Sharing
5.3.4 Core Network Sharing
Chart 25: Savings Realised from Core Network Sharing (2010-2015)
Chart 26: Savings Realised from Core Transmission Sharing (2010-2015)
5.4 Next Step to Network Sharing
Chart 27: Typical CapEx and OpEx Breakdown of Expenditure for European Operators
Chart 28: Cost and Profit analysis for the Network Operators
5.5 Summary
Table 26: Sharing Scenarios
Table 27: Network Sharing Adoption Proposition

6. Formulation, Evaluation and Performance management of Network Sharing Strategy
6.1 Network Sharing Strategy Formulation
Table 28: Increasing Shareholder Values with Network Sharing
Table 29: Basic elements needed in Network Sharing Strategy
6.1.1 Identify Scope of Network Sharing
6.1.2 Other Scope Issues



6.1.3 Objectives
6.1.4 Finding out the Optimal Partner
6.1.5 Data Review
6.1.6 Selecting an Operating Model
6.1.6.1 Passive Sharing Alliance
6.1.6.2 Spinning off the Network as Independent Company
6.1.6.3 MNVO Model
Table 30: Operating model and Associated Issues
6.1.6.4 RAN Sharing Model
6.2 Change Management
6.2.1 Big Bang Approach
6.2.2 Step by Step Approach
Figure 11: Step by Step Approach to Network Sharing
6.2.2.1 Timeline for step by step approach
6.2.4 Monitoring and Control

7. Conclusion
Table 31: Network Sharing SWOT Analysis
7.1 Need to Adopt Lean Business Model
7.2 Regulators need to take Proactive Measures
7.3 Some Questions to Consider by Operators
7.3.1 How can Network Sharing make any improvements in terms of costs and quality'
7.3.2 How does Network Sharing affect Operator's Position in the Wireless Value Chain'
Figure 12: Operator Structure with Network Sharing
7.3.3 Why are vendors pushing for Network Sharing'
7.3.4 Why Operators can share Networks'
7.3.5 Why is operators' core competence changing'
7.3.6 How does Network Sharing affect Vendors Position in the Wireless Value Chain'
7.3.7 What is the need for sharing when the similar benefits can be achieved by Managed Services'
7.3.8 Is sharing a good strategy in all markets and conditions'

Companies Listed

3, Italy
3, UK,
3, Australia
3, Sweden
Aircel, India
Alcatel Lucent
Apple
Arieso
Arqiva
Banglalink, Bangladesh
Celtel, Africa
Cisco
Crown Castle
Datacom Solutions
Deutsche telekom
Djezzy, Egypt
du, UAE



Ericsson
Essar Telecom, Kenya
Etisalat, Egypt
France Telecom
Gridcom UK
HKBN, Hongkong
Huawei
Hutchison Telecommunications
Irancell
KPN
LaCom, Algeria
MCCI
Millicom, SA
Mobilink, Pakistan
Mobinil, Egypt
Mobiserveholding
Motorola
NEC
Nokia
Nokia Siemens Network
O2, Czechoslovakia
O2, UK
Optus , Australia,
Quippo
Reliance Communications
Reliance Infratel
RIM
Roshan, Afghanistan
S Tel, India
Sonera, Germany,
Tele2, Sweden
Telecom Italia
Telefonica
Telefonica, Germany
Telenor. Sweden
Telia, Sweden
Taliya, Iran
Tellabs
Telstra, Australia
T-Mobile, UK
T-Mobile, Czechoslovakia,
T-Mobile, UK
Orascom Telecom Tunisie (Tunisiana), Tunisia
Turkcell, Turkey
Vanu Inc
Virgin, UK
Vodacom, SA
Vodafone, UK
Vodafone, India
Vodafone, Czechoslovakia,



Zain Kenya
Zantel, Tanzania
ZTE



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