News, views and commentary from the telecoms sector across emerging markets and developing countries worldwide

Wednesday, 25 February 2009

Infrastructure sharing to have a major impact in emerging markets in 2009?

More details are emerging about the long-expected infrasructure sharing deal between Indian cellcos Reliance Communications and Swan Telecom, the operator in which Etisalat took a 45% stake in September for USD 900 million. According to an Economic Times (India) article last week, the two companies are now expected to finalise a fifteen year deal.

Swan Telecom plans to launch mobile services in the second quarter of this year and has licences to offer mobile services in 13 of the total 22 'circles' (markets) in India.

The article also states that Reliance Telecom Infrastructure Limited (RTIL), which is the spun off tower business of the Anil Ambani-owned MNO, is also discussing similar passive infrastructure sharing arrangements with other new players such as Datacom, Sistema Shyam Teleservices and Loop Telecom.

The Reliance-Swan deal is not the only infrastructure sharing arrangement recently worked out in India. Another of the greenfield MNO's, Telenor-backed Unitech Wireless was reported by Global Mobile Daily in late January to be finalising an agreement with the Tata Teleservices tower arm Wireless-TT Info-Services Limited.

Globally, we might expect more deals of this kind. Back in March last year, the ITU expressed the view that telecoms regulators are increasingly agreeing on the need for infrastructure sharing. This was apparently a major topic of discussion at the annual Global Symposium for Regulators (GSR-08) in Pattaya, Thailand. "Pro-competitive and open access strategies are needed to cut the cost of deploying ICT networks - and thus take a big step towards achieving the targets set by the World Summit on the Information Society as well as the United Nations Millennium Development Goals," commented ITU Secretary General Dr. Hamadoun Toure at the time.

Led by Sethaporn Cusripituck of Thailand's National Telecommunications Commission, the Global Symposium delegates reached a consensus on a set of best-practice guidelines aimed at offering affordable broadband access through innovative infrastructure sharing and open-access strategies relating to spectrum. According to a Global Mobile Daily report on the Symposium, "one of the more-radical ideas... was that to encourage universal access to communications services and address the 'digital divide' separating urban areas with telecoms coverage from rural areas without, regulators should consider offering incentives for operators to share infrastructure, including financial subsidies on a competitive basis."

Presumably the two recently asgreed deals in India have met with the approvel of Nirpendra Misra, Chairman of the Telecommunication Regulatory Authority of India, who said at the Symposium that "sharing is key to promoting ICT access at affordable prices in rural areas" and recommended that sharing of both passive and active mobile and backhaul infrastructure be encouraged. "Operators will automatically receive subsidies for the deployment and management of towers, funded by the Universal Service Obligation Fund, as long as operators share the towers with three other operators or service providers," said the TRAI Chairman.

This is in line with recommendations outlined in the ICT Regulation Toolkit, a joint production of infoDev and the ITU, which state that "because of the cost savings, infrastructure sharing may be a pre-requisite for receiving Universal Access and Service Fund (UASF) support into new areas."

Infrastructure sharing involving mobile operators, especially in emering markets, might not only be to the advantage of the cellcos themselves. In the same section of the ICT Regulation Toolkit, the argument is put forward that where mobile operators are dominant service providers, "at least one mobile operator may have a near-ubiquitous national transmission network that has potential usefulness beyond the narrow needs of mobile service provision. This network could include the provision of digital backbone facilities from widely dispersed POPs for ISPs. Even if the existing capacity is limited for broadband, an upgrade to provide broadband may be significantly more economic than a completely new network."

India is not the only South Asian market in which mobile infrastructure sharing has been embraced. In September 2008, Global Mobile Daily reported that the Bangladesh Telecommunication Regulatory Commission had unveiled passive infrastructure sharing guidelines aimed at reducing network duplication. The guidlines read: "Operators shall jointly develop, build, maintain and operate new passive infrastructure for providing telecommunication services to the subscribers... However, an individual operator may build passive infrastructures with the permission of the Commission." Tariffs and charges for infrastructure sharing should be mutually agreed among operators, according to the BTRC.
"In case of any dispute regarding the tariff and charges the decision of the Commission shall be final and binding upon the parties," say the guidelines.

At least two of the country's six mobile operators already had network sharing plans in place. In June Warid Telecom's Bangladesh operation and CDMA operator Citycell signed a network infrastructure sharing agreement which sees the two operators sharing the passive elements of around 350 of their combined base stations. Warid Telecom also gained access to a fiber network operated by Citycell for backhaul and bandwidth purposes.

Meanwhile, in the Western Hemisphere, I know of one market where all four mobile operators competing there are set to share infrastructure. In Panama, as reported by BNAmericas in November, the local subsidiaries of América Móvil/Claro, of Digicel, of Telefónica/Movistar and of Cable & Wireless have worked out deals. The article indicates that Claro and Digicel have reportedly already agreed to sharing their infrastructure and that newer entrants Movistar and C&W, which entered the market last year, having been awarded the country's third and fourth mobile operating licenses in May, will also be involved.

Not all operators agree that infrastructure sharing will always offer them substantial cost savings. In a BNAmericas interview in December, Digicel's Luis La Rocca, said that the process is not without difficulties. Speaking about Panama, he said "not many towers were built in the past to accommodate two carriers, so structures will have to be put in place to make this sharing possible." La Rocca was asked if infrastructure sharing helps to reduce initial deployment costs for a greenfield operator, with the interviewer noting that the deployment cost for Digicel in Honduras was USD 450 million versus UDS 350 million in Panama. La Rocca replied that investment had been higher for Honduras because geographically it is a much larger country with a larger population. He indicated that infrastructure sharing had "not substantially" saved Digicel money in Panama.

Another concern could be maintaining quality of service. In August 2008, according to Global Mobile Daily, the local units of Zain and MTN in Zambia declined to share network infrastructure, with both operators claiming it would be difficult to maintain quality assurance. The GMD article indicated that the country's telecoms regulator the Communications Authority of Zambia had urged the sharing of infrastructure as a way of boosting the expansion of services in rural regions.

With varying degrees of enthusiam for network sharing across emering markets worldwide, I wonder how far developments in the largest market of the lot, China, will influence regulators which have yet to rule on this issue. Nicole McCormick of Informa Telecoms & Media wrote in October that the Chinese Government had issued a policy statement requiring mobile operators to share passive network infrastructure, expressing the view that the move could lead to a reduction of about 15% in the 3G capex of China's three operators China Mobile, China Unicom and China Telecom. McCormick noted that a possible downside would be that this could add to the delays in the process of rolling out 3G networks, "since operators will have to spend time hashing out the terms and practicalities of sharing networks."

In the same month, another Informa commentator, Kriz Szaniawski, noted that at a recent conference he had attended, someone suggested that network sharing is a bit like healthy eating in the UK: Everyone talks about it obsessively and watches endless TV shows about the subject, but nobody actually does anything about it." Szaniawski feels that there have been "suprisingly few examples of successful deals worldwide, with a few in Australia, Spain and Sweden. Most others are still at too early a stage to fully assess, and some have clearly struggled." However, Szaniawski feels that an extended economic downturn could well drive network sharing deals worldwide.

With the governments of major markets such as China and India backing network sharing, 2009 may be the year that deals of this kind have a major impact on operators' bottom line and on the extended availability of services in emerging markets.

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