The rival operators are to form a partnership to create a ‘bigger, better’ network in a bid to meet data demand, save money and protect the environment. Michael Garwood finds out about the proposed JV from the companies’ CEOs
Vodafone and O2 have joined forces to help boost national coverage for customers as well as speed up the roll-out of 4G services in the UK.
The operators announced last week the creation of a new joint venture called Cornerstone Telecommunications Infrastructure – which will see them combine their network site assets to create a single “national grid”.
O2 and Vodafone will remain independent of each other and in competition with one another – and will continue to run off individual network spectrum.
Vodafone and O2 CEOs Guy Laurence (pictured left) and Ronan Dunne (pictured right) will sit on the board of the new firm. Two CTOs will join as well as an external CEO for the firm will be appointed shortly.
The proposal, which has yet to be agreed by regulator Ofcom, will see the pair run their respective 2G and 3G
networks from 18,500 sites across the UK and Ireland by 2015.
The move was described by Dunne and Laurence as an extension of their existing partnership, Cornerstone, which was set up in 2009 and has already resulted in 4,000 shared network sites.
They claim the latest move will enable the companies to offer a “bigger and better” network to cope with the growing demand for data.
Dunne said on the joint venture: “This is an excellent opportunity for us to build on the proven Cornerstone partnership.
The previous model needs to evolve in order to deliver on the smartphone revolution, which shows no sign of slowing down. We are agreeing to pool our basic infrastructure into a single vehicle.
“We are keeping the two networks separate – we are just operating them on a shared infrastructure. Mobile networks and mobile operators need to respond differently now to keep one step ahead to ensure we are able to harness the data tsunami.
“We want to get going as soon as possible. We have already notified Ofcom and are actively engaging with them to understand how the operating model will work for regulator reasons and then we plan to get going this year as fast as we can.”
Laurence added: “This is an evolution of an existing successful three-year partnership. Customers will get a bigger and
better network and get it sooner than they would have done ordinarily. It makes sense to evolve the relationship.”
Structure
O2 and Vodafone will manage sites based in selected areas (see right), adhering to strict quality-of-service agreements.
O2 will run the east of the country, Northern Ireland, Scotland and the north of London while Vodafone will run the west, Wales and the south of London.
Neither Vodafone nor O2 would reveal the number of sites they currently own of the 18,500 selected. They did however confirm around 2,000 sites will be decomissioned as a result.
Dunne and Laurence said the decisions on masts were based purely on traffic as their was no logical geographical divide.
Each operator is in control of their half of the country on what equipment they deploy, what equipment they use and what transmission.
Details on equipment vendors are not available at the present time.
Future-proof
Laurence said one of the biggest benefits of the proposal would be enhanced network coverage for both existing and potential customers.
As part of the ‘national grid’, each operator will gain access to around 40 per cent more masts than before – resulting in both operators gaining coverage in areas with poor or no signal coverage previously.
They claim their networks will offer 98 per cent of the country’s 2G, 3G and 4G indoor population coverage by 2015 – two years ahead of the timeline set out by Ofcom.
According to the latest coverage reports from Ofcom, in total 2G coverage in the UK stands at 97 per cent, with 3G at 87 per cent. There are no official figures for indoor coverage, however.
In addition, the Cornerstone firm has pinpointed areas where neither operator has coverage, with the intention of erecting new masts in these locations.
Laurence said: “Our motivation is the fact we have 4G coming around the corner. We have to replace the equipment on the base stations already so it allows us to not only improve 2G and 3G, but lay down the foundations for 4G. It’s future-proof.
“Each operator will have access to more sites so it gives us the opportunity to cover parts of the country with signal – so they will go from no coverage to having both O2, Vodafone, as well as our respective MVNOs.
“It fits firmly in the government’s policy of closing the digital divide, and it’s good for consumers and businesses.”
Dunne added: “We will be able to use a more efficient roll-out into areas with no coverage and also deliver more choice for those with maybe just one option.
“Today, one third of the country doesn’t have indoor coverage, so that’s a significant customer benefit.
“It also helps the rural–urban divide, and it’s the small businesses which tend to be at the forefront of the recovery, so it’s good news.
“We are demonstrating that we are putting our money where our mouth is to do everything we can to ensure customers have choice.”
Cost savings
Neither would discuss the financial benefits of combining their networks (see boxout below) but insisted any savings would be reinvested back into their respective businesses to better compete against the market and each other.
Laurence said: “We wouldn’t enter into this agreement if it wasn’t beneficial to both companies but we are not in a position to discuss financials.
“We are still fiercely competing with one another and nothing will change.”
Dunne added: “What we are trying to do is get more out of our investment. That’s the real focus.
“It gives us a competitive cost structure. In terms of competition it frees up cash for us to be able to compete with each other on products and services rather than basic infrastructure and it’s also good for the environment. Everybody wins.
“We are driven by our desire to provide real choice for customers and compete in a level playing field.
“While it absolutely means we deploy more cost-effectively, that’s not the focus. It’s about delivering to more customers. It’s not just about building the networks.”
Full article in Mobile News issue 516 (June 18, 2012).
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