Business Watch: Voda, O2

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Welcome to the new, all caring, all sharing mobile phone industry.

Network operators seem to be falling over themselves to share their kit these days as they seek to strip millions of pounds of costs out of their businesses and cope with surging demand for mobile broadband.

Last month, Vodafone and Telefónica, the Spanish owner of O2, fulfilled feverish speculation and unveiled a deal to share network infrastructure in four European countries, the UK, Ireland, Germany and Spain.

It’s the biggest agreement of its kind yet announced in the industry and more are likely to follow; a case of, “I’ll show you my base station if you show me yours”.

With the economic gloom showing no sign of lifting, the opportunity to share sites, equipment including masts, and power supply is too tempting to resist.

These are some of the biggest costs that mobile networks have to deal with. Just think of the cost of renting a mast site in Leicester Square, London – that is some pretty ritzy real estate.

The pair, which may extend the deal to the Czech Republic if it goes to plan, say they will keep their own radio equipment and vendors.

“It’s a real transformational deal,” Michel Combes, chief executive of Vodafone Europe, told journalists.

Matthew Key, his counterpart at Telefónica, admitted he had previously been “extremely sceptical” of network sharing deals because of worries the customer experience could be affected. But Key also admitted: “The current economic situation was a catalyst.”

It’s not just about cost savings though. Both sides think they can boost their capacity as more of their punters buy 3G datacards and stretch the limits of their existing networks.

“In developed countries, 3G coverage requirements and the impact of mobile broadband adoption, in particular on backhaul, are among the main drivers for the adoption of network sharing,” said Julian Grivolas, principal analyst at advisory and consulting firm Ovum in a research note.

Full article in Mobile News issue 436 (April 6, 2009).

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