Sharing agreements are not new in the telecommunications sector but the Middle East and Africa region has not embraced them as much as other regions globally. “They have been around for decades in one form or another and have experienced 200% global growth in the last five years. But, with the exception of passive sharing in certain South Asian markets, the trend has largely bypassed the Middle East and North African (MENA) region,” said Chris Buist, director at Coleago Consulting.
The high cost of building infrastructure makes sharing agreements suitable for some regions, as operators need to invest large amounts of money to set their activity. In developing countries in particular, mobile telephony has been central in making services available to large sections of the population. However, much remains to be done to increase the penetration of mobile services, particularly in rural areas.
“The problem arises from the high cost of network infrastructure. This leads to high prices, as operators seek to recover their investment,” says the International Telecommunication Union (ITU), the United Nations organisation for telecommunications.
Regulators need to join and gather the countries operators to promote a healthy competitive environment, in which infrastructure does not get duplicate. Some governments are willing to promote sharing agreements regarding fixed line.
However, when talking about mobile services, operators and regulators tend to invest in their own towers, but the expansion to rural areas and the need to reduce investment are pushing telcos to adapt these agreements to their business models.
“Policy-makers and regulators are examining the role that mobile network sharing can play in increasing access to information and communication technologies. The focus is on how this could generate economic growth, improve quality of life and help developing and developed countries to meet the objectives of the World Summit on the Information Society and the Millennium Development Goals established by the United Nations,” stated the ITU.
Buist expects to see existing bilateral site sharing becoming passive or active sharing joint ventures between operators, tower sales before, during or after the creation of passive or active sharing joint ventures, mergers in markets where there are four or more mobile operators today and backbone transmission joint ventures between non-incumbent operators, enabling some mobile operators to enter the FTTx market.
IHS believes that tower sharing is a very effective way for mobile operators to cut coverage costs, while reducing the time-to-market. “The cost advantages are considerable and come from being able to reduce both capital expenditure (CAPEX) and operating expenditure (OPEX),” the company said.
“Sharing mobile infrastructure is an alternative that lowers the cost of network deployment, especially in rural areas or marginal markets. Mobile infrastructure sharing may also stimulate migration to new technologies and the deployment of mobile broadband. It may also enhance competition between mobile operators and service providers, when safeguards are used to prevent anti-competitive behaviour,” the ITU stated.
William Saad, CTO at IHS, said that tower sharing reduces barriers to entry for operators, as they do not all have to put up new towers. “This represents a material gain for a mobile operator for which towers and accompanying infrastructure typically accounts for more than 60% of the total network rollout cost, a significant financial burden.”
According to several analyst estimates, tower sharing can reduce the overall cost of ownership after accounting for the tower lease costs, by 16% to 23%.
“For established operators, sharing their existing tower assets helps reduce the cost of network operations significantly. They can achieve market coverage effectively, without duplicating costs and extracting maximum benefit from scarce resources,” concludes IHS.