Industry reacts to Vodafone and O2 network share deal

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Key industry figures tell Paul Withers how the network sharing agreement will effect Vodafone and O2, the 4G roll-out debate and the future of the mobile industry

The fires were stoked further between the networks as the deployment of 4G networks across the UK edges closer with the news early last month that Vodafone and O2 are joining forces to help boost national coverage with the creation of Cornerstone Telecommunications Infrastructure.

The agreement sees them combine their network sites assets to create one national grid with both remaining independent of each other, seeing them continue to compete with their respective products and service ranges in the marketplace.

It will enable them to offer 2G and 3G indoor coverage for around 98 per cent of the UK population by 2015 using 18,500 masts, representing an increase of more than 40 per cent for each operator.

The two operators expect there will be an overall reduction of more than 10 per cent in the total number – around 2,000 sites – in the UK as a result.

The operators will be responsible for the design, management and maintenance of the sites in one half of the country. O2 will look after sites in the east of England, Northern Ireland, Scotland and north London and Vodafone  will run them in the west of England, Wales and south London.

Both operators are yet to reveal the financial benefits of combining their networks, but have insisted that savings will be reinvested back into their respective businesses to better compete against the remainder of the market and each other.

Cost savings are the biggest benefit of this partnership, according to the panel of industry personalities we quizzed. Analysts have claimed that both networks could save as much as £1 billion over the next few years by sharing and jointly
managing equipment across the thousands of sites in the next few years.

They agree that more pressure is being put on operators to remain profitable as subscribers increase but customer ARPU declines. Customers may be using more data, but in general overall ARPU remains flat.

According to Analysys Mason senior manager Philip Bates, the focus from the networks has shifted to improving the profitability of their existing customer base rather than seeking new ones.

As a result, there is now increased pressure on the operators to ensure their networks are of a high enough quality to support the needs of both their consumer and enterprise customer bases. That’s where the network share agreement has the most benefit, according to Gartner research director Katja Ruud, as this would be very difficult to achieve if they were working on their own.

From a consumer point of view, the benefit seems obvious – better network coverage for all. This becomes increasingly important, especially in the indirect channel, as dealers battle to fend off competition from rivals working across other networks that may want to play the network coverage card to convince them to move.

As PMGC Technology managing director Jason Yeomans says, the networks have been too reluctant to join forces until now but with this investment in the infrastructure to offer a better service to all, it shows the networks are focusing more on what the consumer wants.

Some observers believe Everything Everywhere, which has welcomed the move of network sharing, will be keeping a close eye on developments.

On the face of it this seems like a positive move for all parties involved, as well as for the future and the development of the mobile industry.

We asked key figures whether this was the case, what the networks should first focus on addressing and if, as they have said, this will really speed up the deployment of 4G networks across the UK.

Full article in Mobile News issue 518 (July 16, 2012).

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