Monday, March 23, 2009

Mobile Access Less Strategic, Vodafone, Telefonica Signal

Telefónica and Vodafone have confirmed wide-ranging plans to share mobile network assets--starting with tower sites--across Europe.

As part of the collaboration, Telefónica and Vodafone also are actively exploring opportunities to cooperate in related areas such as the provision of transmission services, which would extend sharing to radio capacity as well. The companies will share mobile network assets in four European markets where both have operations - Germany, Spain, Ireland and the UK - while discussions are ongoing to extend the agreement to a fifth market, the Czech Republic.

The joint building of new sites and or consolidation of existing 2G and 3G tower sites, with one site housing the equipment of both companies where previously two would have been used, is expected to lead to a significant reduction in the total number of towers in operation.

The move also suggests a perception of where value lies. Towers are deemed not to be strategic, though required, and radio resources, though likewise required, might not offer much end-user value either. That tends not to be as true for more-expensive wired infrastructure, where most executives with the ability to do so tend to prefer exclusive use of their own facilities, essentially forcing would-be competitors to undertake their own expensive construction projects.

The proof point here is what has happened in markets where robust wired network wholesale access has been enforced. In such markets, incumbents tend to lose huge chunks of market share while end user prices fall dramatically. As good as that is for consumers, it is problematic for service providers.

For that reason, regulators are being much more cautious about extending current rules for copper access to new optical access, taking care to ensure that investment opportunities are attractive enough to fund such networks.

http://www.vodafone.com/start/media_relations/news/group_press_releases/2009/telefonica_and_vodafone.html

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