Vodafone and Telefonica strengthen their network sharing agreement

UK mobile operators Telefónica and Vodafone on Thursday agreed to extend their existing network sharing deal to create one single national grid providing 2G, 3G and eventually 4G services to 98 per cent of the UK population.

The extension builds upon the Cornerstone agreement formed in 2009, which saw the pooling of people, cell sites and network sharing technology between two competing companies, and will eventually run to 18,500 sites, on which the operators will be running independent spectrum and competing services.

The two carriers will use the infrastructure to offer indoor 2G and 3G coverage to 98 per cent of the UK population by 2015 and will also use the deal to lay the foundations for two competing 4G networks to deliver LTE nationwide faster than the two could achieve independently.

The unified ‘grid’ will run two seperate nationwide mobile internet and voice networks and both companies will retain control over their wireless spectrum, intelligent core networks and customer data. The two operators will continue to actively compete with each other in all products and services.

Cornerstone will evolve into a joint venture company, with a 50 per cent stake owned by each operator, and existing basic network infrastructure, including towers and masts, will be transferred to the JV or decommissioned over time. The joint venture will also be responsible for the building of new sites needed to extend coverage into rural and remote areas.

Both companies will have access to a single grid of 18,500 masts representing an increase in sites of more than 40 per cent for each operator. They anticipate that there will be more than a ten per cent overall reduction in the total number of sites, in the UK, used by the two operators.

“One physical grid, running independent networks, will mean greater efficiency, fewer site builds, broader coverage and, crucially, investment in innovation and better competition for the customer,” said Ronan Dunne, CEO at Telefónica UK.

Guy Laurence, CEO at Vodafone UK, added: “We have learned a lot from our existing network collaboration but now it is time for it to evolve.”

Fred Huet, founder and managing partner at Greenwich Consulting, said: “This announcement from Vodafone and Telefonica is the expected response to the MBNL joint venture by T-Mobile, Three and Everything Everywhere. The two operators are taking matters into their own hands to improve the delivery of 3G services, while speeding up the delivery of 4G. The roll-out is expected to be significantly quicker as capital expenditure will be reduced, however we still need to know more details about the agreed level of sharing, in order to ascertain the level of benefits for both companies. For the consumer however, this will certainly improve mobile internet in the UK.”

Jeremy Green, principal analyst at Ovum added: “This is an entirely sensible move by Vodafone and Telefonica in the UK. It follows on from the merger of T-Mobile and Orange in the UK into Everything Everywhere. If Vodafone and Telefonica had not also embraced sharing in this way they would have been at a competitive disadvantage. As it was, they were able to build on and extend the relationship that they already had through Cornerstone, their existing joint venture. This sets them up well for the 4G rollout and will help them catch up on 2/3G rollout too.”

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