Vodafone UK and O2 expected to save over £1bn through network infrastructure sharing deal

Analysts at Ovum predict that the two mobile operators will save at £600m on their existing 2G and 3G networks, while the savings from building just one LTE network between them would push combined savings to over £1bn

Vodafone UK and O2 expected to save over £1bn through network infrastructure sharing deal

Analyst firm Ovum estimates that Vodafone UK and Telefonica UK (O2)  will make combined savings of over £1 billion across 2G, 3G and 4G is achievable by 2015 through the network infrastructure pooling deal announced this morning (7 June 2012).

In a briefing with analysts today , the CEOs of Vodafone UK and Telefonica UK opted not to disclose any financial expectations from this 50/50 joint venture. However, Emeka Obiodu, senior telecoms strategy analyst at Ovum, believes both parties can expect to save about 25% of their network costs.

‘The beauty of the deal is that both Vodafone and Telefonica can look forward to saving at least 25% of their network costs. Considering that Vodafone UK spent £575m in capex in the year ended 31 March 2012, this could lead to savings of over £100m a year. Over the three years from now until 2015 when both parties expect to achieve 98% indoor population coverage across 2G and 3G, the combined potential savings would be in excess of £600m.’

He continued: ‘By the time both parties roll out LTE, the potential savings would even be higher. The CEOs told us that the network sharing deal at the 2G and 3G level, especially with the installation of single RANs, is laying a solid foundation for further sharing on LTE. If we then assume that it could cost up to £1bn for each operator to roll out LTE in the UK, 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% LTE coverage in 2015.

Elsewhere, Obiodu, expects that, ultimately, at least 50% of all LTE rollouts will use shared networks. ‘While there is no certainty yet about how LTE spectrum will be divvied up in the UK, this deal lays the groundwork for both parties to build out a single LTE network in the country. That means that effectively, the UK is set to become a country with only two physical LTE networks from the Vodafone-Telefonica group and the Orange-T-Mobile-3 group.

‘Indeed, we are not surprised at this. Since 2009, Ovum has warned that the financial realities facing mobile telcos means they have no choice but to share their networks. We posited that most countries will end up with not more than two networks. Going forward, we also expect that at least 50% of all LTE network rollouts in the world in the next five years will involve some form of active network sharing.’

Written by Wireless magazine
Wireless magazine

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