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LTE to drive network sharing

Cost of spectrum and network deployment makes network sharing an attractive option, says telco expert.

LTE to drive network sharing
The cost of LTE deployment could encourage network sharing, according to analysts.

Telecom operators that are planning to deploy LTE networks should consider entering network sharing agreements with other telcos before they start to deploy their networks, and even before acquiring spectrum, an expert on network sharing told delegates at a recent telecoms event in Dubai.

“We have found that the savings you get from network sharing are greatest if you do them at the start of a capex cycle,” said Andrew Wright, regional partner Middle East, Analysis Mason. “If you do sharing at the start of the rollout of a new technology you get to share the capex as well as the opex, depending on what kind of sharing you do.”

Speaking at the recent Managed Services for Growth Markets event in Dubai, Wright said that operators stand to make significant savings by forming a joint venture with another operator to acquire the spectrum necessary for LTE services and to share the cost of deploying a network.

He added that LTE has created an “extra impetus” for operators to pair up and share the costs of LTE spectrum and deployment.

“With LTE, you could form a joint venture pre-spectrum auction and use that as your bidding vehicle, buy your spectrum in a shared fashion and share your network. It is a very bold step for a pair of operators to do that, but I think the opportunity is there now,” Wright said.

“Of course, the few operators go to a spectrum auction, the lower the prices, so you win twice – once by sharing and once by keeping the auction price down.”

Wright conceded that while operators that enter such agreements might lose the ability to differentiate their networks and operations to the same degree as if they had deployed a network single-handedly, the cost saving would most likely compensate.

“It comes down to the circumstances of the two operators. But by and large I would say that the extra savings you can get from network sharing at the start of an LTE roll out probably in most cases outweigh any hesitations surrounding differentiation,” he said.

Wright stressed that other models of network sharing are available to operators, including passing the network over to a managed services provider or a tower company, and that these cal also bring certain advantages. For example, he said that some telcos might prefer to enter a network sharing agreement via a “third party intermediary” which could also bring the advantage of freeing up finance for operators that opt to sell part or all of their network to a third party such as a tower company.

For Wright, each operators’ situation differs according to their own needs and the state of the market they are operating in, and much depends on whether there is already network sharing in the market and whether they have assets worth divesting and whether that offers a worthwhile means of financing.

“I see a mixed model. I don’t only see good savings from pairs of operators coming together and I also see situations where it is very valuable to have a towerco come in as well,” Wright said.

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