Keep your enemies closer

Vodafone and O2 have looked on enviously as Everything Everywhere and 3UK boasted about the savings they’ve made on network costs and claims to be providing the most comprehensive coverage of any network in the UK through their shared MBNL venture. The operators have spent months complaining to Ofcom about Everything Everywhere’s plans to launch LTE services ahead of the UK auction, and no doubt rued 3UK’s claims that it too could piggyback on EE’s network if it gets the green light.

June 8, 2012

8 Min Read
Keep your enemies closer

By The Informer

Vodafone and O2 have looked on enviously as Everything Everywhere and 3UK have boasted about the savings they’ve made on network costs and their claims of providing the most comprehensive coverage of any network in the UK through their shared MBNL venture. The operators have spent months complaining to Ofcom about Everything Everywhere’s plans to launch LTE services ahead of the UK auction, and no doubt rued 3UK’s claims that it too could piggyback on EE’s network if it gets the green light.

Now they’ve decided if you can’t beat ‘em, join ‘em. Although they remain “ferocious competitors”, they have taken a leaf out of EE and 3UK’s book, and agreed to set up a single national grid providing 2G, 3G and eventually 4G services to 98 per cent of the UK population.

The deal is an extension of the existing Cornerstone agreement, formed in 2009, which saw the pooling of people, cell sites and network sharing technology between the two competing companies, and will eventually run to 18,500 sites.

However, unlike EE and 3UK, which have pooled together their resources and jointly manage the MBNL network, Vodafone and O2 looked at the UK, got out a really big marker pen and drew a line straight down the middle – a bit like what the Informer did as a child when sharing a bedroom with his brother – this is my side and this is your side, and if you step over to my side, I’m entitled to punch you. The Informer wonders if CEOs Guy Laurence and Ronan Dunne have drawn a similar clause into their own contract.

By signing this deal, the two operators now stand to save “at least 25 per cent of their network costs,” according to Emeka Obiodu, senior telecoms strategy analyst at Ovum. He said that considering Vodafone UK spent £575 million in capex in the year ended March 31 2012, Voda and O2 could make savings of over £100 million a year.

“Over the three years from now until 2015 when both parties expect to achieve 98 per cent indoor population coverage across 2G and 3G, the combined potential savings would be in excess of £600 million,” he estimated.

He added that by the time both parties roll out LTE, the potential savings would even be higher.

“The combined potential savings for both Vodafone and Telefonica from this deal would be worth in excess of £1bn by the time they hope to have a 98 per cent LTE coverage in 2015.”

The Informer can’t help but think back to the late 1970s/early 80s, when discussions were being held about setting up one single network in the UK over which all operators would provide their own service. BT was offering to provide the pipes, in a similar way to which it owns and manages most of the fibre for fixed line services today, but at the time, operators were having none of it, insistent that they would buy their own equipment and rent their own sites. BT’s suggestion back then looks like a pretty good idea right now.

Vodafone has indeed been busy this week. The operator also announced that it is in discussions with Australian operator Telstra over the potential acquisition of its New Zealand subsidiary, TelstraClear.

“Discussions are continuing and there is no certainty as to whether an agreement will be reached.  A further announcement will be made in due course, if appropriate,” it said in a statement.

The operator is looking to strengthen its global operations after it blamed its relatively stagnant 2011 financial performance on the “tough macroeconomic and regulatory environment in much of Europe”, where it had to write down the value of its assets in Italy, Spain, Portugal and Greece by £4bn.

And if that wasn’t enough for one week, it then went on to increase its holding in UK-based mobile coupon provider Vouchercloud, which uses the smartphone’s GPS system to locate discounting retailers nearest to the customer.

Vodafone increased its shareholding in Vouchercloud’s parent company, Invitation Digital Limited to 57 per cent from 21 per cent and has the first option to increase its direct shareholding in the future.

Guillermo Escofet, senior analyst at Informa Telecoms & Media said that the move reflects how central offers have become to operators’ mobile advertising and marketing strategies.

“The move also reflects the wider trend among operators of embracing the over-the-top model,” Escofet said. “Rather than focus its strategy on creating a voucher service specifically targeted at its own subscribers, it is investing in a company that targets all mobile users, regardless of which network they are subscribed to. In the globalised world of mobile apps, the limitations placed by operators’ network footprints have become a huge handicap.”

Also this week, a host of large global brands, including mobile network operators, made internet history by permanently making the switch to the IPv6 networking protocol. The coordinated move by brands such as Google, Facebook and Yahoo means that all their participating services are now available via IPv6 enabled equipment.

The IPv6 protocol is a successor to the current internet protocol, IPv4, and the move to the newer standard is seen as critical for the future of the internet. The reason for such a push and the accompanying words of warning from internet registries is the exhaustion of IPv4 addresses. In February 2011, the global internet address authority IANA (the Internet Assigned Numbers Authority) handed out two of the last blocks of freely available IPv4 addresses. The move triggered an automatic distribution of the remaining five blocks to each of the regional registries. There are no more IP addresses to be had from version four and according to RIPE NCC, the regional internet registry for Europe and Middle East, the exhaustion of IPv4 addresses is “the biggest event in the history of the internet”.

Over in Asia, Japanese operator KDDI has deployed what it claims to be the “world’s first self operating 3G and 4G mobile network,” based on an intelligent Self Organising Network (iSON) solution which uses NSN’s advanced NetAct Operations Support System (OSS).

LTE SON makes use of network intelligence and management features in order to automate the configuration and optimisation of networks, lowering costs and improving network performance and flexibility. A key element is its ability to support multi-vendor network environments, reducing time-consuming and error-prone manual processes, and increasing the efficiency of the network.

Steven Hartley, practice Leader of Ovum’s Telco Strategy Practice, explained that the key draw for using SONs is the fact that operators no longer have to send out a field engineer whenever they want to tweak the network to optimise its performance.

“That is a significant reason why operators are getting excited about it. In most developed markets, revenues aren’t growing significantly, so this puts a huge amount of pressure on the cost base,” he said.

“You’re trying to return a decent return to shareholders, you’ve got to keep the costs down somehow to keep the margins at the right level. The network operations costs are an enormous part of any MNO’s cost base, so anything you can do to make those networks run more efficiently, operators will be interested in that.”

Meanwhile, Chinese equipment vendor Huawei won its largest managed services contract in Europe through a five year agreement with Sunrise in Switzerland. Huawei has been selected as the sole managed services partner for the fixed and mobile networks, including the transfer of staff from Sunrise and its previous technology partner.

Under the terms of the agreement, Huawei will be responsible for managing Sunrise’s mobile and fixed network, including internet and IPTV, in addition to providing a range of services encompassing design and planning, network development and integrated network performance management, field operations, network operations, and spare parts management.

Ericsson recently conducted its Traffic and Market Report, and its research has led it to predict that by 2017, there will be more than five billion mobile broadband subscriptions worldwide, by which point 85 per cent of the world’s population will have 3G coverage.

The Swedish vendor said that by this time, 50 per cent of the world’s population will be covered by 4G and the total number of smartphone subscriptions will reach three billion.

The firm’s research revealed that there were 6.2 billion mobile subscriptions, and 170 million net additions, made in the first quarter of 2012. 40 per cent of those net additions came from China and India; China added the most subscriptions for a single country in Q1 2012 with 39 million, followed by India with 25 million. The Asia Pacific region added in total 93 million subscriptions, followed by Africa with 30 million.

And upon receiving the green light to take control of Motorola Mobility, Google is attempting to enter the record books by establishing what it claims to be the world’s longest and most extensive indoor branding project.

A whopping 222.6 metre long banner has been set up in a city obsessed with extravagance, Dubai, and highlights the history of the company. The banner runs along the entire length of a corridor linking terminals in Dubai International Airport. It is currently being considered for a Guinness World Record, which would put Motorola Mobility in the distinguished company of the likes of 11-year-old Fin Keheler, who holds the world record for putting the most snails on one’s face (43); Michel Lotito – the current world record holder of biggest meal ever eaten: a Cessna 150 airplane, yes, airplane; and the young man who changed his name to the longest in the world: “Captain Fantastic Faster Than Superman Spiderman Batman Wolverine Hulk And The Flash Combined”. Captain Fantastic said he did it “for a bit of a laugh”, which is probably not too dissimilar to Motorola’s reasons.

That’s about all for now. Take it easy.

The Informer

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