News
22/09/2009
Mobile operators strategies, business model, market sizing and positioning of vendors
Mobile Network Outsourcing & Sharing
Today, network sharing and outsourcing are not confined to challengers in the mobile market anymore but have become widely adopted among all kinds of mobile operators. This report presents different flavours of outsourcing and sharing and what drives mobile operators to do so. The analysis also sheds light on the long term impact on the industry, including equipment vendors.
Network sharing and outsourcing have gathered significant momentum in recent years and became mainstream even for tier 1 operators in major markets. Today, network sharing and outsourcing are not confined to challengers in the mobile market anymore but have become widely adopted among all kinds of mobile operators. The question is, whether this trend will be a temporary hype, as the spin-off of incumbents' mobile operations in the early 2000s or whether the increasing popularity of infrastructure sharing and outsourcing marks the dusk of the era of integrated network operators/service providers. In the latter case, today's MNOs will ultimately evolve into ServCos, something very similar to full MVNOs; having full customer ownership and a marketing focus but no radio access network of their own. The increasing momentum of the trend towards sharing and outsourcing seems to indicate that MNOs have indeed embarked on an evolution towards an infrastructure-light business model. A number of factors will continue to push MNOs into this direction.
Network outsourcing and sharing at the core of MNO strategies
Network outsourcing and network sharing has been observed for several years already. Following the UMTS licence frenzy, infrastructure sharing became an economic necessity for a number of operators to meet 3G coverage license requirements.. For instance, the most important reference for network sharing in the EU is the deal struck between T-Mobile and O2 to share infrastructures in Germany and the UK, the countries with the most expensive licences in Europe by far. Mobile network outsourcing first appeared towards the year 2004. Mobile challengers were the first players to adopt the model while multinationals were still reluctant to opt for outsourcing. Over the last 2 to 3 years, however, a real boom in the number of infrastructure outsourcing and sharing deals can be observed worldwide. Challengers as well as tier 1 players have multiplied deals in their different worldwide markets and have broadened the scope of the agreements.
Different Flavours of network outsourcing and sharing
"Network sharing" is not necessarily the same thing as "network sharing"; there is a variety of network sharing options and scenarios. The same holds for network outsourcing, where MNOs can opt for different degrees of outsourcing their networks.
• Network outsourcing: The "lightest" form of outsourcing concerns maintenance. Although the MNO keeps full responsibility for running the network operations centre, field maintenance is delegated to the service provider. Such deals may include spare parts management. In the case of network operations and maintenance outsourcing the service provider is in charge of running the infrastructure. The MNO keeps control of network planning and build out. In a full network outsourcing setting all network related tasks are delegated to the service provider.
• Network sharing: The main distinction to be made is between passive and active infrastructure sharing. Passive infrastructure sharing refers to the case where MNOs share assets like sites, power supply or masts but no active elements of the network. If MNOs agree on active network sharing, the deal includes elements such as antennas, Node-B, backhaul capacity or even core network elements. So far, the majority of sharing agreements concerns passive infrastructure only. One important aspect is whether network sharing takes place in a brownfield or greenfield setting. Efficiency gains from sharing will be significantly higher in the latter case, where the infrastructure can be designed from the outset to meet multiple MNOs' demand instead of adjusting existing networks.
Equipment vendors' positioning
Infrastructure services have been the fastest growing segment of telecommunications markets. Network outsourcing is one of the most dynamic elements of these infrastructure services. Competition among vendors is intense as the market is of strategic importance to them. Securing deals with MNOs in an early stage of the market will open the door for further contracts across their international footprints. Multiplying the number of deals also not only allows the vendor to gain expertise but also to generate economies of scale and scope. At the same time, the number of potential clients is shrinking as more and more MNOs share their networks. Providing the additional value of network outsourcing services may therefore be vital to a vendor's long-term viability.
Market size
• Mobile network outsourcing market size: the market generated by this activity reached 3.1 billion EUR in 2008 that represented 8% of the total addressable market estimated to reach 13% by 2012.
• Mobile network sharing market size: the estimated potential savings for passive sharing and active sharing were 39 billion EUR and 49 billion respectively in 2008.
