Vodafone and O2 have formally announced their alliance to combine network sites and masts in a deal that will save ‘hundreds of millions’ of pounds in infrastructure costs, over the next 10 years.
The agreement, first revealed by Mobile two weeks ago, covers five countries.
Crucially, this share deal covers the concrete where the masts stand as well as the masts themselves.
Rent for buildings where the masts are constructed will be split. The two networks will also halve the expense of building and maintaining masts, as well as the cost to power the sites. Vodafone’s Europe CEO, Michel Combes, described these elements as ‘the passive infrastructure’.
Both networks have around 12,000 masts each in the UK. There will now be a review to decommission sites where there is duplication, and plans drawn up to co-build masts where both networks are weak – particularly the more rural areas of England, Scotland and Wales.
Vodafone’s UK CEO, Guy Laurence (pictured, near left), said it was ‘in some ways, a property deal’.
It leaves behind the transmission from masts, which will currently be managed separately, although Combes’ equivalent at O2, Matthew Key, said: ‘The next phase is transmission.’
Key explained why the deal had become a bigger priority for both companies, alluding to the surge in demand for unlimited data deals for smartphones and mobile broadband, and added: ‘It goes some way to future-proofing the network. The current economic conditions have undoubtedly been a catalyst.’
O2’s UK chief, Ronan Dunne (pictured, far left), said: ‘It allows us to meet the cost of demand [for mobile broadband] and increases our footprint ?and our capacity.’
Vodafone is the network under the heaviest pressure to strip out high levels of cost, and that priority will have hastened its eagerness to agree this deal.
However, O2 appears to be the network with the most to do to address network capacity. It had its knuckles rapped by Ofcom one year ago for falling short of the regulator’s minimum network standard, and was threatened with a £40m penalty. Since then, Dunne has claimed that O2 provides 80% of the UK population with HSDPA connection speeds, but the demand for mobile broadband and the one million iPhone customers it has attracted, who are frequently browsing the internet, will be straining ?its network.
Both are on the same spectrum
O2 and Vodafone have said the deal would in no way inhibit competition, even over networks, as transmission would remain an area where the two operators could differentiate - for now.
It is difficult to ignore the fact that the two networks share the 900MHz spectrum bandwidth (coveted by rival operators in the UK). It makes it easier for Vodafone and O2 to deepen their share deal beyond the pooling of sites and masts, at a later date.
Although the deal is pan-European, all parties said it was driven by local CEOs, and it appears the UK was the catalyst.
Laurence said: ‘When you have two minds that are kindred spirits, things move quickly. Conversations were fluid and the momentum was rapid. As other [countries] saw the UK moving quickly, that’s what led things overseas.’
U-turn? ‘This is bang on what I said before’
Key and Dunne respond to whether O2 is performing a u-turn over network share deals
In February 2008, around the same time as the Ofcom warning, Dunne described the benefits of a share scheme as ‘exaggerated’, and commented on
the complexity associated with such programmes.
Dunne said this week: ‘Today’s announcement is entirely consistent with what I said at the time. I highlighted a number of things that I was concerned about. There are parameters on customer experience, cost and complexity, and we’ve met them. This is bang on what I said last year.’
Meanwhile, Key emphasised the ‘current economic environment and deflationary prices’ in having to look at such deals more closely.
Vodafone-Orange deal: ‘We didn’t get the benefits we anticipated’
Vodafone touched on its previous attempt to share network assets with Orange, two years ago.
Laurence said: ‘We didn’t get the benefits that we’d anticipated from the deal.’
He suggested that it was more than simply the two networks operating on different spectrums: ‘It clearly helps when you have similar frequencies. Secondly, it takes two to tango, and in this case (O2 and Vodafone), both want to tango over assets.’
Sites already built with Orange will continue, but the partnership was so weak that there are barely any that have involved co-operation between the two companies.
However, Combes has left the door open for Orange to join the agreement: ‘If there is an opportunity to bring additional players, then we are more than happy to consider them.’