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Special Report: New operators

We have often expressed frustration at the slowness of traditional mobile operators to embrace new business models and support new services, especially those targeted at enterprise, industrial and indoor usage. In the current 4G era, the MNOs have discussed openly how most of them find it hard to make a strong business case for these services. Certainly, they would require new areas of investment – deep indoor penetration being a good example – which would not obviously be justified by significant additional revenues.

In 5G this misalignment of MNO deployment models with the needs of enterprise sectors will become more serious. It risks derailing some of the grand 5G and industrial strategy visions which many governments have set out, and which has driven their support for 5G testbeds and trials. It certainly risks disappointing the expectations of many industries, as well as sectors like education, which are interested in what high quality optimized connectivity (not necessarily 5G of course) could do to enhance their processes.

Some MNOs are addressing the challenge, but they are often advanced players like SK Telecom or AT&T, which are developing full digital platforms, virtualizing their networks and moving towards network slicing. They can therefore support many sectors and services, on an increasingly optimized and on-demand basis, without having to worry about a single industry delivering a massive revenue hike. Instead, each new service, cost-effectively deployed by the new automated platform, will deliver incremental new revenue that adds up to a significant boost to the overall business.

Most MNOs, however, are thinking about this approach in terms of a decade-long evolution – if at all. For many, especially in emerging markets where there is still plenty of growth in consumer mobile usage, there is no need to look beyond more cost-effective ways to hike capacity and support enhanced mobile broadband at scale.

So the gaps must be filled, and the upside is that the demands for new services at affordable prices – from enterprise and from some consumer groups – will drive the industry to a more rich and varied set of service providers. Regulators and governments will encourage new operators to ensure their visions stand a chance of being delivered, and if the existing telcos do not accelerate the progress towards flexible, wholesale platforms, which can support a huge range of enterprise MVNOs cost-effectively, then others will step in.

The disruption of the developed markets may take the form of new challenger MNOs, like the USA’s cablecos or Japan’s Rakuten; of neutral host and wholesale providers emerging from many sectors including towercos and webscale providers (see Wireless Watch May 20 2019); or of a proliferation of private network operators, deploying their own specialized networks in their own spectrum or in shared airwaves, and increasingly improving their economics, and therefore the reach of their services, by leveraging cloud platforms.

On an optimistic day, we can see this spurring some existing incumbents into more innovative approaches, and particularly into cooperating with alternative providers rather than seeing them as threats. This will be essential. In countries where there isn’t a new national MNO like Iliad in France and Italy, the existing operators will still make the biggest investments and be responsible for national coverage and the bulk of public mobile broadband traffic. Creative and cooperative ways for them to work with more localized or specialized networks, providing roaming, spectrum and shared services, will enable them to extend their reach at lower cost, too, into more industrial and indoor environments. National MNOs which do not start to support multi-operator, wholesale and industrial platforms will become targets for consolidation, or squeezed into spiralling price wars.

 

Sprint-TMO merger would set back hopes for a US wholesale 5G platform

The battle between the established operators, keen to keep licensed cellular networks firmly under the control of three or four companies; and a new model that would support new entrants and flexible wholesale platforms, has been particularly clear to see in the USA, for some years now. It is at the heart of the current debate over whether T-Mobile USA should be allowed to acquire Sprint. That debate has shifted from the usual arguments over consumer choice and retail competition, to focus on the wholesale model, and whether merger would disadvantage some of the most potentially disruptive new providers, such as cableco Altice USA.

The heart of the two operators’ arguments for why the regulators should countenance a reduction in the number of national MNOs, from four to three, is that a combined entity would be a better counterweight to Verizon and AT&T, would accelerate the progress of rolling out 5G, and would have a higher quality network to deliver innovative new services including advanced video and quad play bundles.

That is the same dilemma that usually faces antitrust and telecoms regulators – in this caes the Department of Justice (DoJ) and the FCC. Are three strong operators – with high ability to invest in new networks, but a worrying concentration of power – better or worse than four MNOs, which provide greater choice but may include a lame duck?

In many countries, particularly amid western Europe’s recent round of consolidation, there has been too much focus on this rather old-fashioned view of the market. For instance, in the UK, the acquisition of the largest MNO, EE, by incumbent telco BT, was allowed, because it did not reduce the number of MNOs, while the merger of Telefonica’s O2 and Hutchison’s 3UK was blocked because it would have done. Yet, like all developed markets, the UK’s operators are building up fixed, mobile and TV services, so looking at mobile markets in isolation no longer makes sense – and the BT/EE marriage will have a far greater impact on the levels of  competition than that of the two smaller MNOs would have done.

To be fair, while TMO and Sprint may have been singing from an old songbook, the US authorities have taken a far wider view and assessed market impact from many angles, even though the deliberations have sometimes been overshadowed and distorted by the national pressure to make the USA into a ‘5G leader’. The most effective way to accelerate 5G build-out is therefore a key consideration, and is getting too much limelight in a huge country where many of the consumers and enterprises the regulators aim to protect will be using 4G, WiFi and low power WANs for many years to come.

The final decision will, however, be heavily influenced by whether the best way to achieve national 5G quickly is to strengthen TMO by gifting it Sprint’s plentiful midband airwaves, which would place the third MNO in the best spectrum position in the country. But an alternative is to favor proliferation, not consolidation, of operators, encouraging new build-outs, especially wholesale platforms which could support many service providers in a more flexible way than traditional MVNO agreements, by harnessing modern cloud platforms.

The pro-wholesale arguments are being led by Altice USA, which claims that the death of Sprint – whose network will support Altice’s own mobile launch – will set back the ability of non-MNOs to add cellular services to their wireline, enterprise or private network services.

Altice’s latest filing came in the wake of a proposal by the FCC chairman – based on ideas from Sprint and TMO (‘New T-Mobile’) – which would make the merger more acceptable to the DoJ (which is far less favourable to it than the telecoms regulator). This concession would see New TMO sell off Sprint’s Boost Mobile prepaid operation and guaranteeing the buyer an ‘infrastructure MVNO’ (iMVNO) deal.

The iMVNO is the kind of agreement Altice already has with Sprint, which involves a company building its own networks in certain areas – typically small cells for particular locations or industries – and relying on the MVNO agreement for wide area coverage. This model is expected to be popular among private operators, cablecos and enterprise service providers, which can optimize the way they deploy connectivity for their specific target customer bases, and how they monetize it, while avoiding the cost of rolling out a wide area network. Some organizations will deploy the ‘sub-nets’ in shared spectrum, while others will go for a fuller iMVNO in which they lease the host’s frequencies in the specified locations.

Presumably the FCC thought this proposal would appease opponents like Altice, and that Altice might even be the most likely buyer for Boost, given that it would otherwise have to renegotiate its iMVNO agreement with the merged operator. But Altice wrote in a new filing that the “proposed commitments offer nothing new to Altice”, and that none of the commitments from Sprint, TMO and the FCC “address Altice’s concern about the anti-competitive impact of the merger on the wholesale market”.

It also argued that, far from showing New T-Mobile’s willingness to support a wholesale market, “the fact that T-Mobile felt the need to make an explicit commitment to negotiate a competitive wholesale agreement confirms Altice’s concern that absent specific commitments to do so, New T-Mobile will not offer competitive wholesale agreements in a post-merger world”.

It acknowledged that the “commitment to negotiate what appears to Altice to be a full iMVNO agreement with the ‘to be identified’ buyer of Boost Mobile within a specific time period is an important new development”, but nevertheless concluded that the merger should be blocked on the grounds of “the harm to the wholesale market that will result from the merger”.

It is interesting that this line of opposition is being led by a cableco. It seemed that the rising activity of the large cablecos, and a wide-based agreement between the two largest, Comcast and Charter, to cooperate on mobile platforms, would make it easier for TMO and Sprint to merge. When that Comcast/Charter alliance was announced in 2017, analyst at New Street Research wrote: “The emergence of cable as a serious new entrant significantly improves the odds of a Sprint / T-Mobile merger being approved. This announcement on its own may not be enough to convince regulators that we are in a five-carrier market, but it helps.”

But the ability of the cablecos to become fully-fledged mobile, multiplay and enterprise wireless players does depend on having supportive wholesale partners. Comcast and Charter have MVNO agreements with Verizon, but these are unlikely to support their ambitions in the 5G era. In standard MVNO relationships, the host always has the advantage – the ability to control the network, take advantage of new capabilities first, and, as a report by network testing firm Tutela found last year, to ensure MVNOs have lower speeds.

Tutela found that “Comcast’s Xfinity, which operates on Verizon’s network, provides roughly half the average data speeds in urban areas where Tutela conducted tests—12.6Mbps in comparison to 24Mbps. The consistent quality score showed a 33.8-point disparity in Verizon’s favor.” And AT&T’s MVNOs offer speeds that are about half of what AT&T itself provides. On the TMO network, MVNOs and the operator’s own prepaid brands, such as MetroPCS, suffered less disparity in speed, but their customers’ data got lower priority in areas of network congestion, said Tutela.

A conventional MVNO deal may be a useful stopgap then, as the cablecos get started, but will not give them the control and differentiation they will seek in future – hence why Comcast and Charter are experimenting with their own build-outs in shared spectrum, especially the CBRS band, and participating in auctions.

Altice has a better balance of power with Sprint because of the latter’s focus on densification. As it starts to deploy thousands of small cells, the cableco’s sites and backhaul make that roll-out far cheaper and easier, and in the iMVNO, both sides bring valuable assets to the table. It is clear, then, why Altice would not want to swap that arrangement for a more traditional MVNO agreement with New T-Mobile.

And more generally, the idea of asset sharing and exchange, rather than a few powerful hosts dictating the terms to all other service providers, would encourage a more diverse and competitive services market. This is a very important issue for the future shape of US mobile telecoms; how far 5G is rolled out to suit the needs of many industries, not just the traditional MNO model; and how many organizations get to use and monetize 5G.

This is certainly not a new debate in the USA. Sprint has been the most wholesale-oriented of the major MNOs (see inset). LightSquared was heavily encouraged by the FCC because it planned to build a wholesale-only LTE network in its mobile satellite spectrum, a scheme which foundered on fears of interference with GPS services, but has been partially resurrected by the rebranded company, Ligado.

And although Dish Network’s plans for its own patchwork of mobile spectrum remain uncertain, if it does fulfil its promise to build a national 5G network, this is highly likely to support wholesale services – merely adding cellular for its pressurized pay-TV base would scarcely justify the cost of the spectrum and the roll-out, even if Dish finds an amenable network infrastructure partner to reduce its costs (possibly New T-Mobile).

In all cases, a deciding factor may well be the webscale companies – Amazon AWS, Google and Facebook have all been increasingly active in connectivity and have trialled their own services in CBRS and other spectrum. If one of these were to be an anchor tenant for a wholesale network, using it to extend their control from their central clouds right to the connectivity and the edge, it would address the greatest risk for wholesale providers, that their customer base would be too fragmented. In the WiMAX days, Google invested in the Sprint/Clearwire/cableco platform, while more recently, AWS has been linked to Dish’s 5G and IoT plans.

As greenfield sub-nets, or wider area wholesale networks, will be built in the cloud, the exchange of assets in an iMVNO agreement could become even more complex, bringing together different owners of spectrum, cables, sites and clouds – a combination which would transform the competitive landscape. The irony of the current US situation is that such an alliance would make the merger of the country’s third and fourth cellcos inconsequential in terms of market structure – but if the merger goes ahead, the alliance will be more difficult to put together because of the removal of Sprint from the equation.

‘New T-Mobile’ may have to sell Boost, or even support new MNO

 

Meanwhile, according to Reuters, several players may be lining up bids for Boost, assuming the Sprint/TMO merger proceeds with the sale of the prepaid unit as a condition. Analysts expect the price to be at least $3bn, possibly as high as $4bn depending on the levels of interest. Prepaid company Q Link Wireless is reported to be teaming up with private equity backers to place a bid; while Stephen Stokols, founder of disruptive WiFi-first operator FreedomPop, is said to be separately advising another private equity group in preparing a bid for Boost. Also in the frame, apparently, is Peter Adderton, who actually founded Boost Mobile, then sold it in 2004 to Nextel, which was in turn acquired by Sprint.

And it is possible that a cable or pay-TV operator, looking for a well-known consumer brand to accelerate a mobile launch, could also be interested.

But they may all be disappointed if the DoJ does not give the green light. The FCC has come out broadly in favor, to the surprise of many, and suggested the concessions, including the one related to the sale of Boost (though some other concerns, like a reduced number of roaming partners for the US’s large number of regional and rural operators, have not been fully addressed).

Bloomberg sources say that the DoJ will demand additional concessions, and may force T-Mobile and Sprint to go further than just guaranteeing good terms on an MVNO deal with the Boost buyer. It could ask them to divest sufficient spectrum and physical assets to enable a new fourth MNO. Both the guaranteed MVNO support, and the enablement of a new MNO, have been adopted as concessions in European M&A deals, where the number of mobile operators would be reduced.

In Italy, for instance the merger of Wind and Hutchison Three Italia resulted in the sale of assets which allowed France’s Iliad to enter this market (see separate item). In Germany and Ireland, merging operators had to pledge access, on favourable terms, for new MVNOs and the main German beneficiary, Drillisch, is now going on to bid for its own 5G spectrum and potentially become a full MNO, putting the number of players back up to four.

In the USA, creating a new MNO – or a powerful MVNO based around the Boost brand – would be most likely to increase competition in the low end of the market, resulting in price wars and cheap tariffs, but not in faster progress to high value enterprise services and 5G. It would certainly weaken the main argument that seemed to have made the FCC favor a deal – a stronger challenger to the big two, more able to invest in 5G infrastructure. The merged firm might face a choice of being distracted from new business models by the need to protect itself from a new rival at the low end, with a resulting negative impact on profits and ability to invest; and loosening ties with the prepaid market in order to chase Verizon and AT&T into the higher value areas (but that would dilute the ability to take advantage of TMO’s hugely successful Uncarrier propositions).

And whatever happens, the network equipment vendors will suffer from overall reduced capex and opex as the third and fourth MNOs consolidate their investments, with any new player unlikely to be following a capex-heavy route – to be viable, it would almost certainly need infrastructure sharing deals nationwide, and would be likely to harness new cloud-based architectures to reduce TCO.

 

 

Sprint has form when it comes to wholesale and cable alliances:

Sprint was the first to adopt the MVNO business model to expand its reach, and has flirted several times with closer cooperation with the cable sector. If its marriage to TMO is called off, there remains a strong logic to Sprint merging with a large cable operator, or setting itself up as a common iMVNO platform for all of them, to form a national fixed/mobile network.

That would be an evolution of previous attempts. A decade ago, Sprint had various deals – with varying levels of success – with the main cablecos, including co-investments in WiMAX, the failed Pivot fixed/mobile venture, and the SpectrumCo arrangement to bid in auctions. All that cooled when the leading cable operators transferred their affections to Verizon, selling their spectrum to that telco and signing MVNO agreements (which Comcast and Charter are now activating).

But when Sprint started looking for cables to backhaul its Airspan Magic Box and AirStrand units, at the same time that the cablecos were taking another leap at the mobile market, there was the chance to revive the old alliance, harnessing newer technologies from small cells to virtualized cores. As well as the Altice arrangement, Sprint has a deal with Cox to use that company’s cables, and it would be unsurprising if that morphed into a broader cooperation in future, if Sprint does not get swallowed up by TMO. “Moving forward, we will continue to look for new opportunities to work with Cox in ways that are mutually beneficial,” Sprint said.

This could lead to a deal more like the one with Altice, which gives the cableco an MVNO that includes flexibility in how it chooses to use the Sprint network, and the right to build and run its own core network and back office systems.

This is how Liberty Global CEO Mike Fries advised cablecos to negotiate MVNO deals, saying: “What we’ve learned is if you’re going to go MVNO… you need a full MVNO. You need a thick MVNO. You need to control the customer experience, core network.”

Sprint’s then-CEO Marcelo Claure said when the Altice agreement was announced: “As content and connectivity continue to converge, we believe this approach will be a model for future strategic arrangements across multiple industries including cable, tech and others.”

And the MNO’s CFO Tarek Robbiati commented: “A standard MVNO with a cable company in our view would not make sense if there isn’t any reciprocal opening up of the infrastructure for Sprint, and so this is why we went down that path. This is not a standard MVNO deal. There is an awful lot of value exchanged between the two parties.”

Such deals may reduce the MVNO revenue Sprint can command (since some of its fees will be ‘in kind’ in the form of access to backhaul, though Robbiati insisted it will generate payments from Altice). But they can certainly reduce operating costs and accelerate densification and 5G because cablecos not only have backhaul fiber but rights-of-way permits and other pieces of paper which MNOs have been struggling to obtain for their small cell sites, slowing progress in urban areas.

Altice believes it can undercut all the US MNOs while making mobile profits

The outcome of the Sprint/T-Mobile merger saga may have a significant effect on cableco Altice USA’s mobile plans over time because of its innovative two-way asset partnership with Sprint (see previous item). That is unlikely to change in the short term, but might do in future if Sprint is acquired by TMO and the new company takes a different approach to densification and MVNO relationships.

Regardless of all that medium term uncertainty, though, Altice is clear about its immediate plans to launch its first mobile services this year, via an infrastructure MVNO arrangement with Sprint, which will complement its cable and WiFi connectivity, and its planned deployments in the shared CBRS spectrum. Altice insists that this combination will result in a low cost platform that will enable it to undercut its competitors while also making its mobile business profitable in the first year, unlike that of the first cable provider to leap into cellular services, Comcast.

If Altice USA lives up to its claims, it will be following in the disruptive footsteps of a few other new entrants in recent years, led by Iliad’s Free Mobile in France. Iliad is a direct competitor to Altice’s French parent company, which also owns cable and mobile businesses (Numericable and SFR). Iliad also, ironically, hoped to bring its trail of disruption and price wars to the USA in 2014 by acquiring T-Mobile USA, but withdrew its bid. However, it has taken its low cost model to Italy (see separate item).

Free Mobile and Reliance Jio in India epitomize the way that a new entrant can succeed against the odds against well-established incumbents. Both made heavy use of their own or partners’ existing assets – wirelines, sites and so on – to reduce the cost of build-out. Both negotiated roaming and sharing deals to reduce the time pressure to reach full coverage. Both used WiFi-first techniques to keep a lot of traffic off the cellular networks and so reduce the amount of investment into mobile capacity that was needed in the early stages. Both employed startlingly cheap introductory tariffs (free data in Jio’s case) and snappy marketing to attract customers. And both improved their addressable markets and customer control by bundling low cost connectivity with multiplay packages and digital services.

Altice USA will be ticking all these boxes too, in order to promise unlimited tariffs from $20-$30 per line, according to Wall Street Journal sources – not quite at the level of Jio’s or even Free’s prices, but very competitive in the USA. Indeed, this would be between $30 and $60 cheaper than comparable plans from the big four MNOs, and also cheaper than similar offerings from Comcast and Charter, the two cablecos which have already launched cellular services (Xfinity Mobile and Spectrum Mobile, respectively).

Altice is a small player compared to all those other names, with about 5m cable subscribers, but if it does create a splash, it could certainly cause headaches for T-Mobile, in particular. TMO has been hugely successful at portraying itself as the operator with the lowest prices and fairest deals under its Uncarrier campaigns, yet its deals are still more expensive than those mooted by Altice, let alone those in other developed economies with four MNOs. The USA is ranked fifth in the world for the most expensive average per-Gbyte prices on smartphones, and ‘affordable’ plans are often more expensive per gigabyte than higher end propositions.

So the USA is ripe for the kind of disruption which happened in France when Free entered in 2012, offering unlimited calls and data for €19.99 per month on a rolling monthly contract, in a market where the established MNOs charged €30-€40 per gigabyte per month.

Altice says it is the company to get the ball rolling with its plans to launch its own MVNO-based service, via its iMVNO deal with Sprint, this year. Last year, it hired a mobile CEO, Jean-Charles Nicolas, formerly deputy CEO and CFO of Altice’s Dominican Republic unit.

CEO Dexter Goei has been bullish about how the iMVNO deal will reduce Altice’s costs compared to those of other large cablecos, and last summer, boasted on an earnings call that Altice could make its mobile business more profitable than Comcast and Charter could.

“We want to make this a profitable standalone business,” he told analysts. “So, we don’t anticipate, even in our first year of operation, to lose money on this. There may be working capital timing differences relative to handsets and how we treat those, but in terms of losing money, we are not going to lose money.”

By contrast, Comcast lost about $1.2bn in the first year of its Xfinity Mobile launch, according to calculations by analyst Walter Piecyk of BTIG.

Goei said: “Recall we have a full infrastructure-based MVNO, which has attractive economics and flexibility features for us. We have a dedicated and experienced mobile management team which will lead the development, launch and ongoing mobile strategy. In terms of network development, the densification of Sprint’s network, which we’re helping with our AirStrand deployment, is comfortably ahead of schedule as are the upgrades to and expansion of our WiFi network. We are also testing CBRS spectrum with equipment in a 3.5 GHz band as this may be good complementary capacity for us.”

Sprint’s said recently that it has deployed “tens of thousands of strand-mounted small cells” with Altice since making the deal late last year.

The Iliad Italia effect: lowest mobile rates in Europe, more network sharing

Iliad may be seeing its French cable/mobile rival Altice succeeding where it failed in the USA (see previous item), but it is bringing its brand of disruption to the Italian market. Italian 4G consumer tariffs are now the cheapest in western Europe in many service categories,  only a year after Iliad Italia launched. To make matters worse for the incumbents – TIM, Vodafone and newly merged Wind Tre – they paid very high prices in the 5G spectrum auction. All these pressures have led the MNOs to cut prices, and to TIM forming an infrastructure sharing deal with Vodafone, which now looks set to be extended to Iliad.

According to Telecompaper’s annual EU Benchmark report, Italy now offers the biggest SIM-only data allowances for the lowest cost in western Europe. It offers the cheapest average price for deals of at least 10,000 minutes and 10Gbytes, and ties with France, Iliad’s other territory, for the lowest prices for any SIM-only deals.

“Prices started falling already in early 2018 ahead of Iliad’s launch and have continued to drop in the past year, as the operators launch and match each other’s promotions at a dizzying rate,” said Alejanda van de Roer, co-author of the report. “With its market share at less than 5% still, we expect Iliad to keep up the pressure on prices for some time yet.”

The operators have been forced to respond, some establishing new sub-brands for very low cost and SIM-only offerings. In October 2018, Vodafone introduced the first unlimited data plans in Italy and has also offered a special deal of 50Gbytes for €7.

Another survey, by Point Topic, found that Italy is the cheapest country in the EU for consumer 4G subscriptions. Its research found that Italians paid $19.2 (€17) a month on average, in stark contrast to the most expensive countries, Cyprus and Greece, at over $57 (€50). The lowest average cost per Gbyte, however was lowest in The Netherlands and Sweden, which tend to take out subscriptions with larger allowances – their rates were $0.25 and $0.35 respectively, with Italy in third place on $0.39.

The impact of Iliad Italia in its first year belie the predictions that it would be unable to repeat its success in France because Italy had already been through consolidation and price cutting, unlike France in 2011; and because it did not have the physical assets, notably a large base of residential lines and WiFi homespots, to leverage to reduce cost. However, it has taken an asset-light approach in Italy as far as it could, sharing infrastructure where possible, and this will be helped if it does join the TIM/Vodafone partnership.

According to local reports, TIM’s CEO, Luigi Gubitosi, said he would be happy to add Iliad to the 5G partnership with Vodafone, which was announced in February. It included an expansion of their existing deal to share towers and other passive infrastructure, to cover their whole national footprint, and also included options to share some active networking to accelerate 5G deployment and reduce cost, especially in the wake of the high costs paid for new spectrum (€6.6bn in total).

In response to this agreement, Iliad called on the regulator, Agcom, to evaluate the likely impact on competition, and potential market distortion.

Perhaps as a defense against that, and perhaps to further improve the cost efficiencies and economies of scale by adding a third player, Gubitosi said: “The architecture of the agreement is open and we would like it if other operators participated. If Iliad wants to be part of the game with us, we will be pleased.”

Telecom Italia and Vodafone say they will enhance their respective transmission networks to cope with the additional traffic from a shared RAN and from 5G, and said they were reviewing whether to extend their deal to existing 4G networks as well as future roll-outs. On the passive infrastructure side, the two companies already share about 10,000 sites, or 45% of their total footprint, and are now evaluating the option of spinning off all 22,000 towers into a separate venture – a move that operators have made in many countries to get towers off their balance sheets and increase efficiencies.

Gubitosi said: “This partnership will allow our customers to enter the 5G revolution faster and deeper, while at the same time making the best use of both companies’ resources. We believe that network sharing is key to do more, efficiently and better for the benefit of our clients and all stakeholders, in view of the process of change that will be triggered by the launch of 5G in the years to come and that will be paramount for the development and digitalization of our country.”

TIM plans to launch 5G “between June and July”, while its network sharing agreement with Vodafone is due to be finalized in August.

Meanwhile, Iliad is looking for even greater cost-efficiency and predictability across its mobile territories by selling 70% ownership of its tower infrastructure to Cellnex, the rapidly  expanding Spanish towerco which aims to be the ‘American Tower of Europe’.

Following in the footsteps of Bouygues and Altice Europe in France, and many MNOs in other countries, Iliad is selling passive infrastructure to raise cash, reduce capex and strengthen its balance sheet. It will shift site costs to an opex line with a leaseback arrangement for the towers.

The series of deals with Cellnex involve about 8,000 sites, about 5,700 in France, and are worth about €2bn in a mixture of upfront and annual payments. In France, Iliad will place all its towers into a joint venture with Cellnex and retain a 30% stake. The two companies will jointly manage and develop the resulting Iliad TowerCo, which will offer services to all the French MNOs and build new sites to meet their needs.

In Italy, Iliad will sell Cellnex the entire capital of its mobile infrastructure management company, Iliad Italia TowerCo, which will have 2,200 sites by the end of 2019. The proposed deal includes the delivery of 1,900 new ‘build-to-suit’ sites.

Iliad group CEO Thomas Reynaud said: “This transaction is part of a long term industrial strategy allowing us to accelerate roll-out of our 4G and 5G networks and to increase Iliad’s investment leeway. It supports the Group’s new growth and innovation cycle. It enables more efficient infrastructure roll-outs in the future while meeting the challenges of further increasing territory coverage.”

Many other European operators will be looking to increased infrastructure, and even active network, sharing to reduce the cost of 5G deployment and 4G expansion or densification. The economics of 5G will make dwindling sense if there is not more focus on infrastructure sharing and convergence, with the distant but logical end result of splitting a wholesale, scaled-up ‘pipe’ from the service providers. Long before that day, operators can achieve significantly better cost bases if they abandon their instinctive hostility to sharing.

For TIM, sharing deals with other operators are part of a turnaround plan announced in February in the light of a long restructuring saga, a 6% fall in EBITDA in its home market in 2018, price wars with Iliad, and a huge net debt mountain of €25.3bn ($28.7bn).

TIM has also been in talks with Open Fiber, the government-backed broadband operator, about partnership options including a “full business combination on fixed network”. Some TIM shareholders want the company to spin off its fixed line network and operations and merge those with Open Fiber and Gubitosi has been pursuing this idea with the support of activist investor Elliott, but faces opposition from Vivendi, the telco’s largest single shareholder.

Nokia – private networks could be twice the size of public 5G

Wireless Watch firmly believes that private networks, or neutral host networks supporting enterprise and industrial service providers, will be a growing part of the mobile picture – and if they are not, the promises of 5G outside the consumer space will go unfulfilled.

Private networks may be a threat or a partner opportunity for MNOs (see lead article), depending how they approach the market. They will certainly be an opportunity for network equipment vendors, presenting a new set of customers at a time when their traditional clients are trying to squeeze their spending, and spread 5G payments over a long period. The other set of companies which could benefit are the cloud platforms, since many new private networks will be virtualized and have their own cores – and in future, even RAN basebands – in the cloud.

While Amazon AWS would be a clear candidate to host such networks, Nokia is also actively pursuing this sector, more aggressively than Ericsson, which has pulled back from direct-to-enterprise services in favor of addressing the industrial sectors only through its MNO base.

Nokia has rolled out several platforms to support private networks in recent years, including its WiNG IoT offering and Cloud Packet Core. And its CTO Marcus Weldon makes the bold statement that the private network market could be twice as big as the public MNO network space over time.

He said MNOs have deployed a total base of 7m base stations worldwide to date, but the private network sector could reach as many as 14m. He didn’t specify a timeframe for that, or whether he was including small cells (presumably he was, since many private networks will be highly localized and indoor-focused). And he did admit he was perhaps being a bit “hyperbolic” – but the message remained clear, that Nokia sees this as a huge and much-needed source of growth.

Analysts at Mobile Experts forecast that the market for private LTE and 5G could grow at 10% compound annual growth rate to total $3.4bn in value by 2024.

So far, Nokia has deployed 30 private wireless networks for enterprises and others, and is enabling others through its cloud-based packet cores and connectivity-as-a-service offerings. In most cases, the build-out projects involve adding small cells to existing WiFi networks and adding a localized packet core, while routing OSS/BSS and analytics through a secure SD-WAN connection to a cloud service.

“There’s this huge opportunity in local area networks,” Weldon told an investor event last week. “The reason the enterprise or the industrial wants this new network is not because they like networks, it’s because they have a business problem to solve …. Nokia can become part of the value stack.”

Some of these networks will be in shared spectrum – Nokia tested a private LTE system recently, at the Santa Clara Convention Center in California, using the CBRS band. Other examples of private deployments include one at the Port of HaminaKotka near Helsinki and another for smart grid applications in the Brazilian city of Atibaia.

Another set of companies which are showing an interest in private enterprise networks are the US cablecos. With their cables to backhaul small cells indoors and out, they are well-positioned to deploy localized, specialized sub-nets in shared, leased or owned spectrum. Charter, the second largest cable operator, has plans to build a private LTE network in CBRS shared spectrum near its offices in Denver, Colorado, which many believe will be a testbed for future private network offerings.

“Charter intends to install approximately 100 fixed transmitters and employ approximately 500 fixed and mobile EUDs [end user devices] during the testing,” the company wrote in an FCC filing. “The number of devices is largely driven by the operational environment Charter intends to trial, that of an Enterprise Campus deployment of private LTE. As such, much like Enterprise WiFi, the 100 base stations will be overwhelmingly (95%) comprised of indoor Category A devices, deployed in Charter occupied buildings.”

A smaller company, Landmark Dividend, recently announced plans to use 3.5 GHz CBRS spectrum to build private LTE networks for its customers, and it already has a contract with the Dallas, Texas public transport authority, to roll out a private LTE network to connect up to 500 information kiosks on 90 bus and railway platforms.

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