Network Sharing is not right for everybody. However, done for the right reasons, with the right partner and in the right way, it can be a game-changer.
Some people think that Network Sharing is a relatively recent development. When you think about it, operators have been sharing networks since mid-90s; since the first MVNO was launched, in fact. Customers knew their providers as brands, not as network operators. So, sharing one’s network with another brand is actually not that radical.
Obviously, here, we are not talking about a MVNO set-up based on a wholesale access agreement. Instead, we are dealing with joint infrastructure development and possibly with joint ownership. The scope of the shared infrastructure, associated services and the technical solution employed can vary quite diversely, from simple site sharing to full active sharing, indeed even spectrum sharing where the regulator consents. Talking of whom, we have observed over the last decade how the regulatory view, at least in more mature markets, has changed on the subject. In the early days of our industry, infrastructure competition was common philosophy with all regulators and an inescapable part of one’s spectrum licences. That’s changing nowadays evidenced by the increasing trend in Network Sharing.
There are lots of good reasons for considering Network Sharing including
- Improving network coverage footprint and the quality of service
- Catching up with and leapfrogging the competition in network coverage
- Getting ahead of competition by sharing investment in latest technology
- Reducing opex and improving future cost base
- Reducing or avoiding capex, especially for roll-out
- Generating free cash flow to reinvest or return to shareholders
Getting it right delivers significant cost and competitive market-facing benefits; the prize is BIG! The benefits of Network Sharing are clearly very attractive. However, putting one in place can be a bumpy journey. So, before you embark upon it, make sure that your rationale and goals are clear. Here are some implications that need consideration:
- Network Sharing requires cooperation with a competitor – this is not a natural thing to do; principally, as you are about to lose market differentiation on network coverage with your sharing partner. Or even worse, you may be strengthening the position of a competitor.
- You are giving up a degree of control over your network strategy – you are about to share the technology roadmap and future evolution of your network to a certain extent, including choice of vendors and timing of technology changes.
- The legal vehicle for implementation and ongoing governance is equally important as the choice of technical sharing solution. Long-term commitment requires both Shareholders’ buy-in. One should not enter into Network Sharing for short-term convenience. It needs underpinning with goal alignment between the sharing partners and with funding commitments backed up by consequences of default.
In conclusion, there is sound rationale for Network Sharing and its adoption is on the rise globally, as:
- Cost pressures on MNOs continue to increase against a backdrop of flat-lining revenues.
- The Regulatory framework continues to evolve positively enabling Network Sharing partnerships to flourish.
- Infrastructure sharing does not reduce retail competition – both operators can keep strong brands and their own retail strategy, pricing and distribution. It is a common misconception that Network Sharing reduces the ability to differentiate at the retail level.
- There has been proven sharing successes in other industries such as oil, electricity & gas. Sharing infrastructure and investment with retail competition isn’t that new or radical. It’s only new to us in Telecoms!
I would encourage MNOs to evaluate their options sooner, especially if they are not market leaders, and not wait until they are forced to do so. There is a first-mover advantage.
Of course, Azenby would be delighted to help you assess if Network Sharing is right for you and/or help you implement it the right way.