Two years ago the world was rocked by the global financial crisis, pushing up the cost of capital. The expectation was that operators, especially in emerging markets, would move towards network sharing in response.
At last, mobile operators in emerging Asia-Pacific markets have realized that millions of dollars can be cut from opex and capex through network collaboration – but more operators need to jump on the bandwagon, including some LTE operators. As competition from over-the-top players grows, operators in emerging markets must bury their egos and collaborate to survive and prosper.
Celcom and Digi, second- and third-ranked operators in Malaysia, announced in January 2011 that they expect to save more than $650 million in opex and capex over ten years as part of their newly-inked joint network pact. That sort of saving can’t be ignored by other operators in emerging markets.
Celcom and Digi have agreed not only to share transmission networks, but base stations as well. The pair will share and upgrade more than 4,000 base stations, each retiring 1,000 sites no longer required. Network costs for these operators account for around 10% of revenues.
Pan-Asian mobile investor Axiata, Celcom’s controlling shareholder, understands the importance of such deals. The group now has network share deals in place in five markets, spanning an astonishing 17 operators in the region, including in Bangladesh and Indonesia.
In Bangladesh, for instance, Axiata-owned Robi and the country’s number one player GrameenPhone, which is 55%-owned by Digi’s parent Telenor, announced a similar network collaboration in February 2010. Robi and GrameenPhone are currently sharing 800 base stations, of a total 1,000 agreed sites. Subsequently, Robi has also inked an infrastructure-sharing agreement with the country’s second largest operator, Orascom’s Banglalink.
In Vietnam, EVN Telecom and Hutchison’s Hanoi Telecom share a 3G radio access network.
But there are still other opportunities to share infrastructure in overcrowded markets, such as Indonesia and Cambodia, especially as operators expand their 3G networks into regional and rural areas. If network sharing was desirable in the aftermath of the global financial crisis, it is a critical cost-saving measure today as operators struggle to find new revenue sources, especially in developing low-ARPU markets.
Meanwhile, the debate rages over 4G network sharing in Asia-Pacific. Ovum believes it makes sense for operators in some countries to share LTE infrastructure. Network sharing, in theory, is more feasible in the IP world of LTE than on existing embedded service networks.
But early signs are that operators in Japan and South Korea, which do not come from a culture of infrastructure sharing, will launch their own full-blown LTE networks. Japan’s Softbank Mobile is even talking about deploying TD-LTE alongside FDD LTE to alleviate capacity constraints in data-heavy areas. It clearly has no intention to share LTE networks.
Similarly, shared LTE networks will be a difficult sell in Australia, given that coverage and network quality is an important market differentiator, and will continue to be so.
In small Asian markets, where coverage is not a big competitive edge – such as Singapore, Hong Kong and New Zealand – we urge operators to consider sharing one LTE network. Indeed, PCCW and Hutchison in Hong Kong jointly picked up spectrum at auction and thus will deploy a single LTE network.
In emerging markets, LTE network sharing is expected to be particularly widespread, especially among operators that have struggled to reap a return on their 3G network investments.