Ovum:Chinese operator joint venture too big to ignore
Source: cn-c114.net View: 203 Date: 2014-07-24

China is the largest and most recent market to embrace network sharing. China Mobile, China Unicom, and China Telecom have signed an agreement to establish a $1.6bn network-sharing joint ventureto pool their considerable mobile tower infrastructure resources.

The arrangement may not match the scale of the Three Gorges Dam but the statistics are equally mind-numbing, with China Mobile alone accounting for around half a million cell towers.

"The venture will have a significant impact on the Chinese market. The initial effect will be in the form of mobile network–related capex and opex savings, but over time the agreement will also influence network vendor revenues and how the operators differentiate themselves."comments Kris Szaniawski, a Lead Analyst of Intelligent Networks at Ovum.

Unstoppable network-sharing momentum

The sheer size and strategic clout of the Chinese network-sharing deal single it out for comment. The cost savings the joint venture delivers will accelerate LTE rollout in the largest cellular market in the world, not just in remote rural regions but also market-wide, and those cost savings could also help the Chinese operators widen their investment horizons to other markets.

The savings for the three companies are likely to be considerable. A network-sharing deal can deliver network capex and opex savings in the 20–40% range, depending on a number of factors including the mix of passive and active network sharing and the number of parties involved.

A good point of comparison is with tower/site-sharing deals in the Indian market, several of which are estimated to have saved up to 30% on tower/site-related capex and opex.

The Chinese venture is similar in that, initially at least, it is focusing on “construction, maintenance, and operation of towers, ancillary facilities, power supplies, air conditioning, and base station maintenance” and is expected over time to involve the transfer of tower assets to the joint venture.

Any successful network-sharing venture creates built-in momentum. The China Communications Facilities Services Corporation joint venture – which will be 40% owned by China Mobile, 30.1% by China Unicom, and 29.9% by China Telecom – will initially focus on passive network sharing. But if this proves successful it will create an incentive to explore other areas, especially as core network and RAN sharing could bring even greater cost savings to the table.

However, Ovum warns that active network sharing will not happen overnight, since it requires significant network restructuring and raises considerable cultural and business issues. The Chinese operators have different network strategies, for example with regard to FDD and TDD, so these would need to be aligned to make any future active sharing strategy successful.

The Chinese deal also highlights an accelerating global trend. According to Ovum figures, 40 network-sharing announcements were made in the first quarter of this year, compared to 96 during the whole of 2013, 64 in 2012, and 39 in 2011. The Chinese agreement’s focus on passive sharing is not unusual – in 2013, two thirds of global network-sharing announcements involved passive sharing.


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