Telefonica & Vodafone
Telefónica and Vodafone announced today an agreement that will lead to the sharing of mobile network assets in the UK, Ireland, Spain, and Germany. This is the first time we have seen two operator groups attempt to establish network-sharing agreements beyond a single national border.
The multi-national scope of the agreement illustrates how important network sharing is becoming to operators, as a means of generating operational cost savings.
A striking aspect of the agreement to share networks in the UK is the fact that Vodafone has already agreed to share networks in the UK with Orange. It appears that today's announcement supersedes that agreement (though that has not explicitly been confirmed). We believe that Vodafone's prospects for progress in UK network sharing are better, now that Telefonica's UK operator, O2, has supplanted Orange as Vodafone's partner.
In our view, the Orange agreement had three major shortcomings, two of which are mitigated by the O2 agreement:
Vodafone's and Orange's UK spectrum resources are disparate. Most importantly, Vodafone holds licences to 900MHz spectrum, whereas Orange does not. O2, by contrast, does hold licences in the 900MHz range
The Orange agreement applied solely to W-CDMA (3G) sites, and did not encompass GSM (2G sites). The new O2 agreement includes all of the operators' sites, both 2G and 3G
However, the third shortcoming of the Orange agreement continues to apply in the new agreement. Vodafone and O2 will only share masts, antennas, sites, cabinets and power supply. Thus, in our view, the extent to which Vodafone can realise the potential cost savings of network sharing in the UK will continue to be limited. By contrast the UK's other network-sharing partnership, between T-Mobile and 3, covers all aspects of their radio access networks.
