Vodafone, Telefonica share European networks
The rumours were true. Vodafone, the world’s biggest operator by revenues, and pan-European carrier Telefonica, owner of the O2 brand, are sharing network infrastructure across Europe.
On Monday, the two carriers announced network sharing contracts across Germany, Spain, Ireland and the UK with detailed discussions ongoing in the Czech Republic.
The programme is expected to deliver significant business improvements, including cost savings amounting to hundreds of millions of euros for both companies over the next ten years, through a reduction of operating costs, and the ability to jointly build out new sites.
Both operators will continue to manage their traffic independently, but customers in the affected markets are expected to benefit from improvements in coverage, especially for mobile broadband.
In Germany, the companies are to share existing 2G and 3G sites, with shared masts also used for microwave backhaul; in Ireland the companies will share all network sites and jointly conduct new build outs; in Spain both companies will extend an existing site share agreement from 2007, which includes the shared usage of power, cabinets and mast; and in the UK both companies will focus on joint build of new sites and the consolidation of existing 2G and 3G sites.
When rumours of the network sharing deal first began circulating earlier this month, Informa Telecoms & Media analyst Paul Lambert noted that a deal between Voda and O2 would collapse the number of networks in the UK from five to three.
“This represents a major shift that’s taking effect in the industry, not least because it shows just how far operators have come over the last five years in what they consider to be their core business. No longer are they focused on operating networks, they are mainly focused on providing services,” Lambert said.
But, beyond the UK, this deal is significant because of the signal it gives to operators and, importantly, regulators worldwide: network sharing is the future. The UK government is understood to support the move by operators to share networks, which sends a powerful signal to other governments: let your operators share networks because it will improve network coverage and will likely lower the cost of services to end users. Indeed, the UK government’s recent Digital Britain initiative outlines aggressive broadband network coverage goals.
“Regulators will surely take note of what’s happening in the UK, and elsewhere in Europe such Sweden, and realise that to improve network coverage getting operators to share network is the way forward,” Lambert said.