LTE World Summit 2012 David hazeldine deutsche-telekom-thurs_masterclass_zone-1
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LTE World Summit Barcelona May 2012

LTE World Summit Barcelona May 2012
MASTERCLASS

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LTE World Summit 2012 David hazeldine deutsche-telekom-thurs_masterclass_zone-1 Presentation Transcript

  • 1. Network Sharing Options…. LTE World Summit - 24th May 2012 Barcelona.David Haszeldine, Technology EconomicsTechnology, Deutsche Telekom.
  • 2. Current Network situation…. Where are we today? • Mobile Network Operators (MNO) have built national radio infrastructures in parallel • Multiple costs … • A lot of the RAN network of each MNO is under utilised Why….. In the past • Competition – coverage was a key market differentiator • Regulatory – the licence required it Now • Coverage – less of a differentiator • Services – the real differentiator… • Cost is now a key driver ! • Regulator may be more flexible David Haszeldine LTE World Summit 24 May 12 Barcelona 2
  • 3. Network Sharing … cell traffic distribution David Haszeldine LTE World Summit 24 May 12 Barcelona 3
  • 4. Network – cell revenue distribution 0% 10% Cumulated Revenue 20% 30% 50% revenue from circa 10% sites 40% 50% 60% 80% revenue from 30% sites 70% 80% 10% revenue from 50% sites 90% 100% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Sites David Haszeldine LTE World Summit 24 May 12 Barcelona 4
  • 5. Network Sharing …savings? an example …. • Two operators share 50:50 - average 4,250 sites each • Assumed - saving efficiency of 80% and cost saving efficiency of 80% Operator A Annual RAN Opex (€m) € 52.0 Operator B saving Annual RAN Opex (€m) € 58.5 Personnel Costs € 7.0 € 2.2 saving Leased Lines € 10.4 € 3.3 Personnel Costs € 9.4 € 3.0 Site Rental & Leasing € 22.9 € 7.3 Leased Lines € 5.3 € 1.7 Maintenance & Repair € 0.8 € 0.2 Site Rental & Leasing € 29.8 € 9.5 Services € 4.2 € 1.3 Maintenance & Repair € 0.6 € 0.2 Advisory Fees € 0.5 € 0.2 Services € 5.9 € 1.9 Other Costs € 6.2 € 2.0 Advisory Fees € 0.6 € 0.2 Total € 52.0 € 16.6 Other Costs € 7.0 € 2.2 Total € 58.5 € 18.7 • This gives a target saving of £35.3m or 32% on a target 4,250 node network • But this is just a target …. • Lets say they want a 6,000 node network? • This can be achieved within the given Opex envelope and a reduced saving made David Haszeldine LTE World Summit 24 May 12 Barcelona 5
  • 6. Network Sharing …. Integration/Consolidation costs?  Integration costs may not be trivial  Say 2500 sites are terminated  Lease termination allowance €20m  Site decommission costs €4m  Site reconfiguration/upgrade €40m to €240m  Core network re-configs €10m to €20m  Access network upgrades €15m to €25m  Project management €15m to €30m  Asset write off €15m to €25m  So a ….€120m to …….€360m potential integration cost!  Maybe not a 3 year pay back! David Haszeldine LTE World Summit 24 May 12 Barcelona 6
  • 7. Network Sharing Joint Venture Options • Geographic split of low traffic areas  Country split into regions  MNOs take a region/s each …customers roam  Joint Owned Operating Company A  All RAN assets put into one network and the best network built  RAN Assets stay with parent – use MORAN…..MOCN  Full sharing agreement on all assets - irrespective of ownership  Tight exit clauses  Stringent Financial and Performance KPIs set and enforced  Jointly Owned Operating C  As above but sites used are 50% provided by each company or some other formal split agreed  Possible usage charge on respective assets  Jointly Owned Operating Company C  As above but assets transferred David Haszeldine LTE World Summit 24 May 12 Barcelona 7
  • 8. Network Sharing – things to look out for …. • Similar Marketing strategy in medium term? voice and data service provision equipment upgrades policy introduction of new technology/services • Similar technology in RAN? 2G supplier 3G supplier Backhaul architecture • Synergies in support contracts • Site and Access Lease termination agreements … Early Termination penalty clauses? • Support contract Terms and Conditions …. Early Termination penalty clauses? David Haszeldine LTE World Summit 24 May 12 Barcelona 8
  • 9. Network Sharing … does it work? It depends • Management willingness to change.....? • Equipment commonality – maybe an issue ? • Access network – remove spare capacity, good synergies? • Site lease/purchase strategy - ? • Support contracts – in house/managed services/outsourcing synergies? • RAN Network operations performance • Network Integration performance • Marketing – issues? • P&L issues • Asset valuation • Restructuring cost treatment David Haszeldine LTE World Summit 24 May 12 Barcelona 9
  • 10. Network Sharing – Regulator issues? Regulator  Unlikely to approve market dominance  May not like any market consolidation – even at a network level  May like to see the Operators costs reduced …so they can squeeze tariffs?  However, in the UK and elsewhere in Europe, they have approved deals David Haszeldine LTE World Summit 24 May 12 Barcelona 10
  • 11. Network Sharing ……. David Haszeldine LTE World Summit 24 May 12 Barcelona 11
  • 12. David.Haszeldine@telekom.comMobile: +44 795 7654 941