With the current economic climate taking its toll around the world, mobile network operators are considering new tactics to improve customer service and reduce churn while also lowering costs. One idea that has struck a chord with operators worldwide is network sharing, which sees competitors partnering to lower their expenditure on infrastructure.
Network sharing can take many forms and may involve the sharing of either active or passive network assets. Active infrastructure sharing includes all the electronic components deployed by operators, such as microwave radio equipment, switches, antennas and transceivers for signal processing and transmission. Unfortunately, active infrastructure sharing has proven notoriously difficult to implement.
Meanwhile, passive infrastructure sharing refers to “dumb” network assets like towers, air-conditioning equipment, generators, technical premises and pylons. Even then, passive network sharing has the potential to deliver huge cost savings to Asian mobile operators by reducing both their opex and capex. Effective passive network sharing can reduce the number of new masts that operators need to deploy, while also spreading the cost of any new sites that do need to be created between multiple companies.
Yet, if there were no difficulties associated with network sharing, operators across Asia would already have instituted it. One problem is that the business case for network sharing remains to be proved and it is difficult to accurately predict when operators are not legally permitted to know the exact details of each other’s opex.
In many Asian countries, the incumbent fixed line and mobile operators are either partially or completely government-owned, such as Telkomsel in Indonesia. Such operators tend to have a majority share in their country’s network infrastructure. While Western operators would welcome network sharing agreements, government-linked operators in Asia want to have full control of their network infrastructure for fear of losing ground to these new competitors.
The rapidly expanding and lucrative Asian market also means that domestic operators do not need to give ground to foreign telcos in exchange for investment. For example, Business Week data show that China Telecom earned $3.3 billion in profits last year, with total revenue of $25.8 billion. This success has given many Asian operators the freedom to heavily restrict foreign investment in domestic networks.
However, network sharing in the Asian market saw an immediate boost with the rollout of 3G services in countries like China. Both Western and Japanese operators, who had already implemented 3G services in their home markets, were able to provide China with essential technology and experience and this allowed them to make in-roads into the Chinese market.
This has left many Asian telecoms regulators now facing increasing pressure from foreign mobile operators with lucrative 3G contracts for network infrastructure sharing in light of the deregulation of the telecoms industry. This situation is complicated still further by the strict laws in many Asian countries governing the ability of foreign organizations to own land.