Mobile Operators Must Establish Network Sharing Partnerships While Window of Opportunity Exists
The time is right for mobile network operators to seek partners for strategic cooperation on Radio Access Networks, according to the latest report from Arthur D. Little. However, operators must act now, because those who move quickly will narrow options for other competitors in the market.
Global expenditure on technologies such as LTE is estimated to reach $14 billion by 2015, yet most markets are struggling to extract significantly higher ARPU from rising data usage. The challenge now is to split the cost of mobile data between operators who cooperate at increasingly deeper levels in their infrastructure in order to gain significant competitive advantage in their market.
Mobile operators are in a strong position to significantly reshape their access economics given the new opportunities to acquire spectrum, while equipment vendors are increasingly keen to promote 4G technologies. Financial investors are also interested in participation.
However, there are a number of constraining factors when looking for the best potential partner:
- Regulators scrutinize any indication of reduced competition - infrastructure cooperation has to be distinctly separated from retail competition to avoid objections.
- Spectrum is being reallocated and new frequencies are being awarded through auctions that often encourage bid-consortiums.
- It is claimed that technology is maturing to a point where multiple frequencies, technologies and operators can be served out of one "box" - how far is this true?
- How does each potential partner view their radio access assets - are they considered predominantly revenue differentiators or opportunities for cost reduction?
- There are geographic and capacity needs, and frequency band issues, plus needs of product portfolios, including quality of service parameters and vendor choices (current and future).
- Commercial models need be designed to be as pragmatic and simple as possible.
"Mobile operators need to recognize that the economics of their industry has changed and that historic independence at every level needs to give way to smarter economic structures and partnerships, especially in terms of infrastructure," says Karim Taga, Director at Arthur D. Little leading the global technology economics competence center. "Crucially, those operators who establish strategic cooperation partnerships first stand to benefit the most, while simultaneously limiting options for followers in that market."