Network Sharing business planning

Our approach to conducting a feasibility study for network sharing and developing a strategy for implementation
To receive a full description of the network sharing process map please contact us

Stefan Zehle, MBA

CEO, Coleago Consulting Ltd

Graham Friend, MA
Managing Director, Coleago Consulting Ltd

Tel: +44 7974 356 258 stefan.zehle@coleago.com

Tel: +41 79 855 1354 graham.friend@coleago.com

July 2010

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Network Sharing Overview Coleagos Network Sharing Business Planning Process About Coleago Consulting Examples of Network Sharing

Contents

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Network Sharing

Network sharing, an introduction

Explaining types and of network sharing and benefits to mobile operators

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Network Sharing

Network sharing, an introduction

Network sharing is becoming an imperative in developed and emerging markets

Operators can achieve significant savings in cost and faster coverage rollout through sharing of network assets. In mature markets with limited or no revenue growth, cash flow can only be increased through cost reduction. Hence, the recent surge in sharing infrastructure
The Trend Towards Network Sharing In the early days of mobile, operators built entirely separate networks. Since then there has been a gradual evolution from this approach, starting with site sharing (often mandated by the regulator), and now going as far as merging networks i.e. sharing the radio access network (RAN). Infrastructure and network sharing deals have been agreed between major operators in Europe, North America and Asia and elsewhere showing compelling opex and future capex savings. Industry players and regulators appear to agree that at this stage of the mobile industry life cycle, it does not make sense to build entirely separate networks. Models of Network Sharing There are six main models of network sharing:
site sharing and / or tower sharing is the most common form of market structure and forecast usage patterns; and regulatory imperatives and constraints.

The Benefits The greatest benefit of network sharing are substantial reductions in cash expenses:
Roll-out capex can be reduced, thus yielding immediate cash flow

benefits; and
Lower network opex can be achieved, providing a long term

saving and hence higher EBITDA margins.

Network sharing can speed up coverage roll-out, notably for

mobile broadband services, using higher frequency bands.

National roaming provides an attractive option for new market

network sharing;
Backhaul / backbone sharing, suitable where mobile operators

entrants and operators who do not have lower band spectrum. In some markets regulators have mandated national roaming to aid new entrants.
Shared networks also mean shared investment risk particularly in

have to build their own transmission rather than lasing capacity from a fixed network operator;
full RAN sharing, including backhaul transmission is more

the case of mobile broadband. In markets where coverage obligations are a feature of licencing, network sharing can be an attractive alternative to fulfil such coverage obligation. Collaboration between MNOs makes it more commercially feasible to cover regions with low population density. This may be particularly true in emerging markets and may actually help to deliver policy objectives with regards to making internet access available in rural areas.

complex and hence rarer;

backbone (core) transmission sharing; core network sharing, which is quite rare; national roaming, which does not involve asset transfer.

Each sharing model has its own strategic and economic drivers, technical requirements and regulatory considerations. An operator specific assessment must be made to evaluate network sharing potential and attractiveness considering:
the overall strategy as well as the value and competitive position

of the current and planned network;

the availability of suitable partners and partnership models based

on existing assets and competitive positions;

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Network Sharing

Network sharing, an introduction

Drivers for network sharing are different for mature and emerging markets
In some mature mobile markets consolidation is already under way. Network sharing can be viewed as a form of industry consolidation. India is a case in point because true mergers impossible due to regulatory constraints.
The Drivers for Network Sharing in Mature Markets Site sharing is nothing new. Often site sharing, and particularly mast sharing, was mandated by regulators keen to accelerate new market entry and to minimise the environmental impact of BTS sites. However, recently network sharing has moved to the top of many operators agendas. The main drivers are:
In mature mobile markets revenue growth is limited or total

Under this scenario there is in effect consolidation at the network level of the value chain. Network sharing, in particular RAN and core network sharing may be a mechanism whereby consolidation can be introduced at wholesale (network) level, while keeping retail operations separate. Since regulators are mainly concerned with competition at the retail level, forming a Network Company may gain regulatory clearance even where regulators block full consolidation. This means operators can achieve some of the benefits of consolidation through extensive network sharing. Mobile Broadband in Emerging Markets A major concern of policy makers in emerging markets is to bring internet access to rural areas. These rural areas tend to have the following characteristics:
Lower concentration of demand Lower than average household incomes Lower concentration of businesses Lack of backhaul and backbone infrastructure Long distances between population centres

industry revenue may even decline. In this situation the only way to grow cash flow is to reduce opex and future capex.
Mobile operators are now building mobile broadband networks,

notably HSPA and LTE. These require considerable investment in the RAN and there are costs in acquiring new spectrum (2.6 GHz, 700 / 800 MHz). Given that there are significant demand and technology uncertainties, operators are keen to minimise capex associated with mobile broadband.
It is much easier to agree network sharing for new networks i.e.

mobile broadband, than to introduce sharing in existing 2G networks. Consistent with the industry life cycle, i.e. reaching maturity, consolidation among operators is becoming more common. Austria, Australia, the USA, and the UK are some markets where consolidation is already a reality. Of course consolidation in the same market always raises competitive and regulatory issues. Network sharing can be viewed as consolidation by stealth. Depending on the extent of sharing, the definition between what constitutes an MNO and an MVNO will become blurred. If two MNOs pool the vast majority of network assets in a joint venture network operating company, what remains of the separated MNO looks in fact more like an MVNO.

Given these characteristics, the economic case for building mobile broadband coverage is weak. However, if mobile operators pool resources to jointly build mobile broadband coverage in rural areas, the business case for rolling out HSPA or LTE coverage improves dramatically. Therefore, regulators in emerging market may actively encourage network sharing, particularly HSPA, in rural areas as a means to bring internet access to those populations. Adverse effects on retail pricing are unlikely since operators still compete in urban markets and generally licence conditions prevent geographic price discrimination, i.e. tariffs must be national.

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Network Sharing

Network sharing, an introduction

Types of network sharing

The big investment in transmission required for HSPA and LTE networks push mobile operators towards network sharing which extends well beyond simple tower sharing
Site / Tower Sharing
Antenna A Antenna B Shared Mast Shared Site

Backhaul / Backbone Sharing

Antenna A Antenna B Shared Mast Shared Site Shared Antenna

RAN Sharing

Shared Mast Shared Site

Network A BTS/Node B Network A Backhaul Network A BSC/RNC Core Network A

Network B BTS/Node B Network B Backhaul Network B BSC/RNC Core Network B

Note: In some cases only the tower is shared

Network A BTS/Node B

Network B BTS/Node B

Shared Backhaul Network A BSC/RNC Core Network A Network B BSC/RNC Core Network B

Backhaul / backbone sharing can produce huge benefits in emerging markets

Shared BTS/Node B Shared Backhaul Shared BSC/RNC Core Network A Core Network B

Core Transmission Ring Sharing

Netw.A SGSN GGSN

Shared Ring and Core Netw. Elements

Netw.A SGSN GGSN Shared VAS Platform Antenna A

National Roaming

Netw.A MSC

Netw.A HLR

Netw.A OMC

Netw.A MSC

Netw.A HLR

Mast A

RAN Network A

RAN Network B

Shared Transmission Ring

Netw.B SGSN GGSN

VAS Network A

RAN Network A

VAS Network B

RAN Network B

Shared Transmission Ring

Netw.B SGSN GGSN

Network A BTS/Node B Network A Backhaul Network A BSC/RNC Core Network A

Subscriber of network B roams on network A. National roaming is a different approach because it does not involve the shared ownership of physical assets.

Shared OMC

Netw.B MSC

Netw.B HLR

Netw.B OMC

Netw.B MSC

Netw.B HLR

Indicates shared network assets

Source: GSMA, adapted by Coleago

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Network Sharing

Network sharing, an introduction

The potential benefits of network sharing are wide

As mobile markets mature, management focus is shifting to rationalisation. Network sharing reduces cash costs.
Benefits of Network Sharing Type of Sharing Passive Site Sharing Rationale
Reduced site acquisition times for new Expansion into previously unprofitable areas

entrants
Access to locations of strategic importance,

by reducing capex and opex requirements

Counter environmental / health concerns, in

e.g. where space for new sites is limited

Increased likelihood of obtaining planning

the context of increasing pressure to reduce the number of cell sites due to health concerns
Reduced competition for sites vis-a-vis

permission for new sites

Reduced opex (site lease)

landlords
Reduced capex (site build) Reduced environmental and visual impact Shift forward the point where deployment of

Mast / Tower Sharing Transmission Backhaul / Backbone RAN

Reduced site acquisition and build completion

times
Shared build cost, particularly in emerging

markets
Fewer sites and masts for the same coverage Reduced environmental and visual impact

fibre rather than MV is economic

Reduced capex and opex, very important if

Access

fibre backhaul upgrade is considered

Capex saving fibre upgrade e.g. from MW

Core Network

Fibre Ring

Capex and opex savings where spare

capacity Core Network Elements VAS Platforms

Delayed investment in core network elements Reduced maintenance and operational cost

Delayed investment in VAS system elements Increased capacity VAS systems

Enhanced capability Reduced maintenance and operational costs Increased coverage, particularly in remote

Roaming

National

Reduced or delayed infrastructure investment Speed to market

areas

Source: GSMA, adapted by Coleago

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Network Sharing

Network sharing, an introduction

Network sharing can deliver network opex and capex cost savings of up to 60%
Much of future capex is capacity related, i.e. driven by mobile broadband services. A collaborative approach can yield major savings in backhaul and backbone transmission.
Potential cost Savings from Network Sharing Sharing Model Savings in Roll-Out Capex Savings in Network Operations and Maintenance Depends on the split of tower vs. rooftop sites with the biggest capex saving potential for tower sites

Site / Mast Sharing

Civil works, some passive

RAN
Site rents

5-10%

5-10%

Transmission Sharing
Backhaul

5-15%

5-15%

Joint fibre backhaul deployment for mobile broadband may deliver large savings.

RAN Sharing
Passive and active RAN Site rents Transmission capex / opex

20-25%

20-25%

Backbone sharing
Backbone (core network)

5-15%

5-15%

transmission Core Network Sharing

Backbone sharing Core network elements

Depends hugely on geography, capacities required and existing fibre infrastructure

15-25%

15-20%

Total

Up to 65%

Up to 65%

Source: Northstream: GSMA, Network sharing; PTS (Swedish regulator); Bjrkdahl & Bohlin; McKinsey; Coleago
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Network Sharing

Network sharing, an introduction

Tower or Site Sharing

Site and mast sharing is already widely adopted and usually uncontroversial because it does not involve the sharing of active network elements
Tower / Site Sharing Site sharing is favoured in urban areas, due to complexity and the expense of finding new sites and therefore reduces lead times to improve coverage. In rural areas, the high expense of connecting to power and road access can drive site sharing. Environmental (visual) and public health concerns are an additional driver for tower sharing. When site sharing also involves tower or mast sharing, the economics are even more compelling. The civil works of mast sites can account for 65% of RAN capex in suburban and rural areas. Tower / site sharing is common because it does no involve the sharing of active network elements, the focus is on civil works. Technical Considerations
In many urban areas in order to satisfy local planning authorities, In Pakistan Telenor, Ufone and Warid agreed in 2006 to share

sites and towers to reduce rural coverage roll-out costs. Regulatory Aspects
Regulators encourage site / tower sharing due to city planning and

environmental purposes. Often site sharing is a licence requirement.

In many countries regulators mandated that rental prices for site

sharing must be based on cost, often with the view to help new entrants. Example Shared Sites

operators disguised masts as lampposts or trees. This may block mast sharing.
Several antenna aspects such as tilt, height, azimuth angle etc.

Shared Tower

must be compatible between MNOs

Tower sharing requires common view on future alterations on the

shared mast and issues may arise if operators acquire different spectrum blocks in future auctions. Deployment Examples Site sharing is common in both developed and emerging markets and is mandated by the regulator in several markets.
In France 20-40% of sites are shared, depending on the operator. T-Mobile and O2 share sites for their 2G networks since 2001 and

Shared Shelter

Shared Power Generator Shared Enclosure

for 3G networks in Germany since 2003.

In India, operators have created jointly owned tower companies

Shared Land

(e.g. Indus Towers) and over 40% of all sites are shared, often with multiple networks tenants on one site.
In the US and the UK independent tower companies host several

operators on the same site.

Generally, only mast, site, outdoor shelter, and other equipment (power connection, power backup, air conditioning, fence) are shared. Radio equipment as well as transmission can also be shared, but with a significant increase in complexity.
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Network Sharing

Network sharing, an introduction

The tower or site sharing may be done through 3rd party tower companies
Some of the early tower sharing deals were driven by the desire to release capital by selling assets to tower companies. However, there is the risk of creating a tower monopoly
Tower Business Rationale Saddled with the high cost of 3G licences and the cost of 3G build out, many mobile operators sought to release capital from the sale of their tower assets. This also had advantages from the stock market perspectives since the telecoms business and the tower business were valued on a different basis. Mobile telecoms operators are deemed to be growth stocks whereas the tower business is based on predictable, stable cash flow. The communication tower or mast business is a large business dominated by infrastructure and or real estate orientated companies as opposed to technology companies. For example Crown Castle International Inc. and American Tower Corp. are the dominant independent tower companies in the USA. More recently, tower companies also moved into the transmission space, benefitting from the growth in demand for backhaul as a result of increase mobile data traffic. An example if FiberTower in the USA. The features that make the tower business attractive to investors are:
Restrictions in granting building permits may create local

Renting Tower Space The rent or lease prices mobile network operators have to pay to tower companies depend on a number of factors.
Location and availability of alternatives are a significant issue. As

with the real estate business what matters is location, location, location.
In some cases operators share in the construction cost in

exchange for a rent reduction.

Volume discounts are common as are discounts for a long term

commitment. The Risk of Creating a Tower / Site Monopoly In countries where operators have sold towers and rooftop sits to 3rd party operators, they have effectively created a monopoly with control over an essential facility. In many countries, it is difficult or impossible to build new sites as site build authorisations are refused. This means the only option is to go onto an exiting site owned by a site or tower company. In some markets independent site companies control virtually all sites in a given area. This means the mobile operators become price takers in a monopoly market. For example in the UK, this has had some negative impact on operating costs and lead to litigation.

monopoly. It is this which also makes is risky for operators to sell their tower assets to a dominant operator.
Long-term contracts are the norm. High switching costs result in high renewal rates. Most of the operational expenditure is fixed. The combination of predictable revenue and opex results in a

steady cash flow.

Tower companies have low borrowing costs because they can

offer towers as collateral.

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Network Sharing

Network sharing, an introduction

RAN Sharing (1 of 2)
Sharing the RAN increases the savings potential and the roll-out of mobile broadband provides an opportunity to realise these savings
RAN Sharing RAN sharing implies sharing the entire Access Network, including backhaul transmission. Traffic is split at the point where the MNOs core networks take over. Variations in architecture and implemented technologies make this approach more difficult to execute. It is dependent on technological specifics of each network. Where new networks are being rolled out e.g. wider 2G coverage in rural areas or 3G mobile broadband, RAN sharing is mainly a way to reduce capex requirements. Where RAN sharing is introduced in an existing network, the main driver is to reduce opex, for example by decommissioning sites. RAN sharing can be an attractive way of reducing capex to cover rural areas, for example to fulfil regulatory requirements. Obstacles to RAN Sharing RAN sharing is complex from a contractual and technical perspective. These difficulties are much greater for existing networks than for new networks. Hence RAN sharing is talked about more in the context of rolling out mobile broadband (HSPA and LTE) networks than for existing 2G networks. There is a significant interplay between existing assets and the view taken on the evolution of mobile broadband. There are many demand and technology uncertainties, but RAN sharing requires contractual certainty. Therefore it takes several months to agree RAN sharing contracts. For example, T-Mobile and 3 in the UK required 7 months to develop the heads of agreement and a further 5 finalise the contract. Hence it is important to identify show stoppers early on in the negotiation process. RAN Sharing and Technology Evolution RAN sharing may pose problems in the context of technology evolution or if one of the sharers fails to win spectrum in future auctions. Avoiding site build capex is one of the sources of values for new spectrum. Many countries plan to auction spectrum in the 2.6 GHz range and in lower bands 700 or 800 MHz. Operators who share the RAN may have to coordinate their bidding, yet may be prevented to do so under auction rules.

RAN Sharing
Shared Antenna

Shared Mast Shared Site

Shared BTS/Node B Shared Backhaul Shared BSC/RNC Core Network A Core Network B

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Network Sharing

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Network sharing, an introduction

RAN Sharing (2 of 2)
In emerging markets RAN sharing may become a political imperative in order to deliver universal service objectives
RAN Sharing Examples Despite the legal difficulties, technological complications and strategic concerns RAN sharing is growing, particularly in the context of rolling out mobile broadband networks. Examples of RAN include:
In December 2007,T-Mobile and 3 formed Mobile Broadband

Shared Backhaul: A New Opportunity The growth in mobile data traffic dues to HSPA and in future LTE means operators have invest massively in backhaul. Here big savings can be had, particularly if fibre is deployed . This can lead to huge savings particularly in difficult geographies. Indonesia and the Philippines are prime examples.

Network Ltd, a JV to build and operate a joint network in the UK.

Following the 2008 Advanced Wireless Services (AWS) spectrum

auction in Canada, in 2009 Bell & Sasktel and Rogers & MTS respectively agreed to build joint HSPA networks.
In Sweden,Telenor and Tele2 are jointly rolling out an LTE

network. Regulatory Aspects Some regulators (e.g. Germany, Austria, Denmark) consider that RAN sharing may create market distortions and does not deliver additional advantages to the public:
If one operator in a three player market has a higher cost base

because they do not share the RAN with the other two this reduces their ability to compete on the basis of price.
If spectrum is auctioned, there will have to be some coordinating

between competing operators, thus reducing competition for spectrum.

From an environmental perspective, the benefits are largely

captured by site / tower sharing,. Some regulators, particularly in emerging markets, consider that RAN sharing may be a method to bring telecoms access to rural communities and it may even be part of a USO programme.

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Network Sharing

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Network sharing, an introduction

RAN and Core network sharing, a form of consolidation

If everything, including the RAN and core network is shared this may be viewed as consolidation by stealth
Core Network Sharing Core network sharing is as yet uncommon and beyond the sharing of the backbone it is likely to remain marginal. There are two main variants of core network sharing.
Sharing the transmission ring only. Mainly applicable when an
Netw.A MSC Netw.A HLR

Core Transmission Ring Sharing

Netw.A SGSN GGSN

Netw.A OMC

operator has spare capacity on the transmission ring

Sharing network logical elements such as VAS platforms or the

RAN Network A

OMC. Consolidation by Stealth If the RAN and core network are shared, the definition between what constitutes an MNO and an MVNO is blurred. If two MNOs pool the vast majority of network assets in a joint venture network operating companies, what remains of the separated MNO looks in fact more like an MVNO. Under this scenario we have in effect consolidation at the network level of the value chain. Given than in some markets, notably in Europe, consolidation in already happening, core network sharing may be a mechanism whereby consolidation can be introduced at wholesale (network) level, while keeping retail operations separate. Deployment Examples Core network sharing is in the early stages, and a mainstream approach is yet to emerge. In the US, Cingular and AT&T shared core GPRS network before they became one company. Current MVNO models (large in Sweden and Netherlands) could be considered a variant of core network sharing, depending on the specifics of each implementation. Regulatory Aspects Regulators tend to be more restrictive in order to maintain operator independence and competitiveness. For example, MSC sharing is prohibited in Norway.
RAN Network A RAN Network B

Shared Transmission Ring

Netw.B SGSN GGSN

VAS Network A

VAS Network B

Netw.B MSC

Netw.B HLR

Netw.B OMC

Shared Ring and Core Netw. Elements

Netw.A SGSN GGSN Shared VAS Platform

Netw.A MSC

Netw.A HLR

RAN Network B

Shared Transmission Ring

Netw.B SGSN GGSN

Shared OMC

Netw.B MSC

Netw.B HLR

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Network Sharing

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Coleagos approach to network sharing

An overview of Coleago's process to develop the business case for network sharing, planning network sharing, partner selection and agreeing terms

To receive a full description of the network sharing process map please contact us

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Network Sharing

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Network sharing business planning process

Process map for developing a network sharing business case and implementation plan
Developing a network sharing business case is the pre-requisite for entering into detailed negotiation and combined analysis with an identified network sharing partner . The process of developing a network sharing business case involves a number of go / no-go decision points to minimise the commitment of time and resources at each stage of the project.
Network Audit, Strategic Assessment and Business Case Development 1
Determine Objectives and Understand the Base Case

Implementation 6 7
Develop Business Case Develop Implementation Plan

2
Strategic Analysis

3
Network Readiness Audit

Partnership Model Selection & Partner Engagement

5
Asset Valuation

Understand the rationale and the evaluation criteria to be used to select the preferred network sharing model and to evaluate the network sharing business case. Develop an understanding of the business as usual business case and the financial forecasts for the business without network sharing. We refer to this as the base case

Review the strategic, market & commercial drivers for network sharing and determine whether there is a strategic rationale for sharing. Evaluate the sharing model options and identify the best strategic fit and assess whether potential partners would consider sharing and develop a short list of operators.

Understand whether the network can support the selected sharing option. Estimate the investment required to make the clients network ready for sharing.

Engage with the short listed potential partners to assess their interest in network sharing. Discuss the clients preferred sharing model and agree with the interested parties the partnership model which will form the basis for developing the business case.

Where a new network sharing entity is to be established the value of the assets to be transferred must be calculated. In the case of roaming based agreements or a form of leasing model an estimate must be made of the revenue potential to be generated from sharing and any sharing costs

Develop a financial model for the identified network sharing model and calculate the value of network sharing to the client based on the NPV of business with and without (base case) network sharing.

Strategic go / nogo decision point

Technical go / no-go decision point

Partner go / nogo decision point

Commercial go / no-go decision point

Develop an implementation plan that will support a detailed opportunity assessment e.g. preparation of asset register, creation of draft term sheet / LOI by describing deal breaking principles (e.g., ownership structure, pricing) of chosen scenario(s) , develop partner engagement tactics, internal communication strategy and timeline and project manage the combined analysis.

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Network Sharing

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About Coleago Consulting

A specialist telecoms management consulting firm

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Network Sharing

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Coleago Consulting

A leading boutique telecoms consulting and training firm

Based in the UK Coleago provides consulting and training services to global and regional telecoms, media and technology players
Operators and regulators Telecoms operators around the world trust Coleago to provide insight and advice on key strategic and commercial issues through our broad range of consulting and training services. Experience based consulting approach We do not use inexperienced associates or analysts all our consultants have a minimum of 10 years experience and most have over 15 years, often at board level in operational businesses. Our insight and advice is therefore based on practical experience and proven processes and methodologies developed over many years. Clients can be confident that their project will be delivered by Partner and Senior Manager level consultants from start to finish and our solutions and recommendations will be credible, relevant, realistic and practical. Developed and developing market experience Coleago has worked with clients in developed markets and also in some of the most challenging emerging markets including the Yemen and the Sudan and we have launched and operated GSM businesses in countries such as Algeria. Small, effective teams Our consultants are highly experienced, multi-skilled and have extensive project management experience. This allows Coleago to deploy smaller teams as we do not require the hierarchy of traditional consultancies to manage large teams of juniors. Clients find our small teams easier to work with and integrate into their own project teams. Exceptional vale By eliminating many of the overheads of traditional firms we are able to offer end-to-end partner level consulting at fee rates that provide exceptional value. Advice covering a broad range of technologies We have advised clients on wireless, fixed, cable, satellite and fibre based technologies. We have specialist expertise in spectrum valuations and spectrum auctions have participated in more than 50 awards since 1994. Media and technology experience We have developed strategies and business plans for media companies, TV channels and web based businesses as well as technology companies. Innovative training services Coleago has developed a range of training and management development programmes, including a War Game (business simulation)
Manager Partner Senior Managers

Senior Consultant

Traditional Consulting Firm Model

Junior Consultant

Analyst

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Coleago Consulting

We provide a broad range of consulting services

We specialise in telecoms business analysis, planning and modelling to ensure that our advice and recommendations deliver increased shareholder value
Strategy & Business Planning Strategy Development, Marketing Strategy War Gaming Business Planning Business Modelling

Spectrum and Licences

Spectrum Strategy

Spectrum Valuation for Auctions

Spectrum Auction Bid Strategy

Licence Applications

Marketing & Customer Management

Market Forecasting & Market Planning

Market Segmentation & Customer Insight

Customer Life Time Management

Improving Customer Care

Due Diligence

Commercial Due Diligence

Technical Due Diligence

Business Transformation & Cost Reduction Improving Network Performance

Cost Reduction

Restructuring

Turnaround

Network Audit

Network Sharing

Outsourcing

Regulation & Interconnect

Interconnect Cost Modelling

Interconnect Agreements and RIO

Regulatory Strategy

Accounting Separation

Digital Content & Media

TV Business Planning

Digital Media Strategy

Digital Content Monetisation

Fund Raising

Information Memorandum

Equity Fund Raising

Debt Fund Raising

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Coleago Consulting

We offer an innovative suite of training, development and coaching services

Our telecoms War Game is a unique and exceptional management development platform and our Dragons Apprentice offers a new approach to team building
Specialist Telecoms Trainers Our trainers are first and foremost telecoms industry experts who are able to gain the respect of programme participants. They are also outstanding trainers with a passion for their subjects. Telecoms Focus Our programmes are developed exclusively for the telecoms sector and use real life telecoms case studies, examples and benchmarks throughout. Bespoke Solutions We develop bespoke solutions for clients often utilising information about their specific markets to illustrate key points. Tailored Deliver We provide pre-course questionnaires and hold telephone interviews with every participant to ensure that each and every delivery contains the right content delivered at the appropriate level. Innovative Programmes We use simulation tools, role plays and challenging case studies to provide an entertaining and rewarding learning experience. War Gaming Our War Game process is the most realistic simulation of a telecoms market currently being offered and is the closest thing to running a telecoms business after actually running a telecoms business!

The Real Telecoms MBA

Finance for NonFinancial Managers

War Gaming & The Dragons Apprentice & Coaching

Technology

Investment Appraisal & Excel Modelling

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Coleago Consulting

Coleago has delivered assignments for global operators and smaller players
Our clients include fixed and mobile operators, MVNOs, equipment vendors, regulators and content providers

Kuwait
Gibraltar Regulatory Authority

ComReg Ireland

VIP-Net GSM d.o.o Croatia

P4 Poland

Sudan

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Coleago Consulting

Global outlook
We have delivered projects on every continent of the globe
Canada, USA Austria, Belgium, Bulgaria, Czech Republic, Croatia, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Spain, Sweden, Switzerland, UK

Australia, China, Hong Kong, India, Indonesia, Iran, Japan, Korea, Malaysia, Pakistan, Philippines, Thailand, Taiwan, Singapore

Caribbean, El Salvador, Haiti, Mexico, Panama

Algeria, Tunisia, Egypt, Sudan, Madagascar, Morocco, South Africa Argentina, Venezuela, Brazil

Kuwait, Saudi Arabia, Yemen, Oman

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Coleago Consulting

Coleagos consultants lead and shape the industry

Coleago is regularly asked to speak at key telecoms conferences around the world as well as sitting on governmental working groups and industry bodies that shape the future of the industry Business texts written by the founders of Coleago Participating in shaping the telecoms industry
Coleagos consultants are actively involved in telecoms

industry events. For example, Stefan Zehle, Coleago CEO, spoke at over 20 conferences and forums, and most recently at the GSMA Spectrum Workshop in London (June 2010).
Coleago consultants are cited in the press world-wide

including Total Telecom, Wall Street Journal, Wall Street Journal Asia, Deutsche Welle, Business & Economy India, Financial Times, New York Times, BBC News.

Guide to Business Planning named Outstanding Academic Title 2009 The Guide to Business Planning, a book authored by Graham Friend and Stefan Zehle the Directors of Coleago, which recently appeared in its 2nd edition was named as one of the "Outstanding Academic Titles, 2009 (Business and Economics)" by Choice, the US academic review journal. Source: Choice, 5th of January 2010 www.lib.uwo.ca/news/business/2009/12/23/outstandingacademictit les2009businesseconomics.html

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Stefan Zehle, MBA

CEO, Coleago Consulting Ltd

Graham Friend, MA
Managing Director, Coleago Consulting Ltd

Tel: +44 7974 356 258 stefan.zehle@coleago.com

Tel: +41 79 855 1354 graham.friend@coleago.com

Scott McKenzie, ME, MBA

Director, Coleago Consulting Ltd

Tel: +44 7825 294 576 scott.mckenzie@coleago.com

Contact

Further information: www.coleago.com

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Network sharing examples

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Network Sharing

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Network Sharing Examples

3 UK and T-Mobile (UK) 3G network sharing agreement in the UK

T-Mobile and 3 formed a 50:50 joint Venture "Mobile Broadband Network Ltd" to reduce the cost of rolling out and operating mobile broadband
Market Context T-Mobile (UK), originally the 3rd entrant in the UK, largely with 1800 MHz frequencies had lost market share and declined to be the 4th player in a 5 player market with a share of 16%. 3 UK, is a pure 3G company with access to 2.1 GHz frequencies only. It is the 5th player in the UK with a low market share. The company had a market share of only 6% and is not trading profitably at EBITDA level. Scope and Nature of Agreement T-Mobile and 3 formed a 50:50 joint venture company "Mobile Broadband Network Ltd with the mission to build and operate a joint 3G network. The agreement between the companies included:
A few additional towers to be jointly built within 2 years to reach

MBNL manages and delivers the combined 3G access networks of the two companies. This collaboration will lead to almost complete population coverage for 3G services across Britain by the end of 2008 with significant improvement to dense urban in-building coverage in 2009. As the world's largest known active 3G network consolidation agreement, this has significantly increased both operators' 3G network quality and coverage, accelerating the provision of new high-speed mobile broadband services and delivering substantial cost savings as well as environmental benefits by de-commissioning 5000 radio base station sites. Source: "Mobile Broadband Network Ltd .

13,000 base stations and population coverage targets

3G RAN sharing (sites, Node Bs and RNCs, excl. core,

Combined Coverage of T-Mobile and 3 UK 3G Network

frequencies and 2G)

Objective to profit from consolidation and joint build-up (Phase 1,

2008)
Significant increase of 3G coverage in rural and urban areas,

JV

including indoor coverage (Phase 2, 2009)

HSDPA (Phase 3, 2010)

Rationale
Speed up introduction of new high-speed mobile broadband

services
Achieve 98% coverage, 18% more than required under the terms

of the 3G license.
5,000 sites decommissioned by T-Mobile out of a total of 18,000,

i.e. a saving of 28%.

Generate an estimated UK 2 bn capex and opex savings over

2007

2009

ten years.
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Network Sharing Examples

Several network sharing agreement following spectrum auction in Canada

Following the AWS spectrum auction in Canada in 2008, during 2009 several operators agreed joint HSPA network builds
Market Context In July 2008 Canada concluded an auction for Advanced Wireless Services (AWS) spectrum in the 2.1 GHz range, i.e. spectrum to deploy mobile broadband services.
Bell and Telus also agreed to cooperate on sharing the cost of

rolling out their HSPA networks. A key difference between the two operators is that Bell only obtained 10 MHz of new spectrum whereas Telus acquired 20 MHz.

Canada has three major national players, Rogers, Telus and Bell, . At In addition to the network sharing agreements, operators entered into site sharing agreements. For example, DAVE, another new the time of the auction Rogers was the only GSM/HSPA operator (the entrant with spectrum in ten of Canadas largest urban areas others operated CDMA/EVDO networks). The auction was based on came to a colocation agreement with Bell. By using existing different regional tiers and included spectrum blocks reserved for infrastructure built by Bell, we can greatly quicken our time to new entrants and regional incumbents such as SaskTel and MTS. In market. Dave Dobbin, president of DAVE Wireless addition the auction rules mandated cost based national roaming. For Bell and Telus the additional spectrum also provided the opportunity to migrate their networks from CDMA/EVDO to GSM/HSPA. Network Sharing Agreements Following the auction several network sharing deals were agreed between the national and regional operators:
SaskTel operating in Saskatchewan reached an agreement to

National Mobile Operators

Regional Mobile Operators

share HSPA mobile network infrastructure with nationwide operator Bell. For Bell the agreement increased planned population coverage from 93% to 94%, while for the regional SaskTel the main benefit was nationwide coverage via Bells network. This new network sharing agreement with SaskTel allows us to quickly and cost-effectively extend the country's largest and fastest wireless network to even more Canadians.
Wade Oosterman, President of Bell Mobility
MTS operating a mobile network in Manitoba and a national

business telecoms company agreed to deploy its HSPA network jointly with Rogers Wireless. MTS and Rogers will deploy a HSPA network in the regional area where MTS already has a presence, i.e. Manitoba. In addition, MTS will have access to Rogers national network as a roaming partner, thus being able to compete nationwide.

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Network Sharing Examples

Vodafone and Orange rural RAN sharing agreement in Spain (1)

Date: 2007 Vodafone and Orange in Spain
Regional 3G RAN Sharing The deal in Spain was agreed in 2007. At the time Vodafone had a 30% market share and Orange a 22% market share. Both are competing against the dominant fixed and mobile incumbent Telefonica. At the time of the 3G auction such deal was prohibited, but later gained regulatory acceptance due to economic feasibility and environmental benefits. The agreement covers 3G RAN sharing on regional basis to cover new rural areas to fulfill regulatory coverage obligations and possible go beyond coverage obligations where there is a business case. Large cities are excluded from the agreement which focuses on small towns with less than 25,000 inhabitants. As of mid 2009, 2,600 Node Bs were shared and this is projected to increase to 5,000 by 2011. Both MNOs expect 40% fewer base stations compared to individual deployment Orange announced the following benefits:
200mn capex/opex savings expected over 5 years 75mn in cumulated capex/opex savings realised by March 2009 Reduced negative environmental impact
Region B Region A Region B Radio controller Node B

Covered by Agreement
Region A Radio controller Node B

Out of scope
Products and services

Vodafone core network

Products and services

Orange core network

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Network Sharing Examples

Vodafone and Orange rural RAN sharing agreement in Spain (2)

The agreement delivered the savings that were envisaged.
Large Savings Realised In March 2009, Orange showed that the RAN sharing agreement delivered what was expected. By March 2009 50% of roll-out was completed and 75 million of cumulated savings had been achieved. As a result Orange announced that is was in the process of examining an extension of the arrangement to other countries. The Deal in Spain did no Block Subsequent Deal In March 2009 Vodafone and Telefonica announced a far reaching multi-country site sharing agreement which also covers Spain. Vodafone insisted that will have no impact on the existing network sharing agreement with Orange. In Spain Telefonica also has a parallel agreement with Yoigo, see next page.

Source: Orange presentation, March 4 & 5, 2009

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Network Sharing Examples

Telefonica and Yoigo national roaming and site sharing agreement in Spain
For Yoigo and new entrant, the site sharing deal not only reduced capex but solved the problem of not getting site build permits
Market Context Yoigo, the new entrant in Spain found an agreement with the dominant national fixed and mobile incumbent, Telefonica, for roaming and site sharing. Telefonica was the leader in the Spanish mobile market whereas Yoigo was very small. Yoigo was established Dec. 2006 by TeliaSonera. The two network were huge different in scale:
Telefonica had 99% population coverage and has 14,000 sites. Yoigo had only 42% population coverage.

By European standards Spain is a large country with a relatively low population density which makes it prohibitively expensive for a new entrant to reach coverage parity. National roaming is the only way in which a new entrants can compete effectively. Scope of Agreement The agreement between Telefonica and Yoigo covered:
2G and 3G networks 5 years nationwide agreement, for rural and urban coverage Tower / site sharing agreement (passive elements only), access

to entire network Rationale

For Telefonica the driver was to find a new source of revenue.

There was also regulatory pressure to give access to the new entrant.
For Yoigo the deal delivered increased network coverage with

limited capex and also helped to resolved the difficulties to receive authorisations to build new masts.

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Network Sharing Examples

A multi-country site sharing agreement that may evolve further

"It's a real transformational deal," Michel Combes,
CEO, Vodafone Europe Market Context Telefonica O2 and Vodafone are two major mobile operators with a significant footprint in Europe. They are relatively strong operators in each of their markets. Scope and Objectives of the Agreement The agreement is a site sharing agreement rather than a RAN sharing agreement. The operators will share sites, passive equipment including masts, and power supply, but will not share their radio equipment. The agreement covers Britain, Germany, Ireland and Spain and may be extended to the Czech Republic. The objectives of the agreement are:
Offer enhanced quality of service levels within the network

The details of the agreement vary for each country:

Germany: Both companies to share existing 2G and 3G sites.

Shared masts can also be used for microwave backhaul.

Ireland: Both companies to open all network sites for sharing by

"The current economic situation was a catalyst.

Matthew Key, CEO, Telefonica Europe, March 2009

the other party. New build will also be conducted jointly where rollout plans are aligned.
Spain: Both companies to extend existing site share agreement

from 2007, which includes the shared usage of power, cabinets and mast. To date 2,200 sites are shared under this agreement. During 2009 and 2010 additional sites will be included.
UK: Both companies to focus on joint build of new sites and

consolidation of existing 2G and 3G sites. Evolution of the Agreement The agreement as is simply amounts to site sharing. The benefits that this delivers are significant, but further benefits could be achieved. The partners announced that as part of the collaboration, Telefnica and Vodafone are actively exploring opportunities to cooperate in related areas such as the provision of transmission services. Share transmission could deliver substantial savings in the context of rolling out mobile broadband coverage. .

footprint to improve customers mobile experience as well as support the delivery of services such as mobile broadband to a greater number of customers across a wider coverage area .
Reduce the environmental impact of the network by lowering the

number of sites required by each company, including consolidation of sites.

Jointly build new sites where opportunities exist . Reduce network operating costs. Vodafone mentioned that it can

save up to 10% of network operating costs through passive sharing deals such as the one agreed with Telefonica.

Source: Company announcements

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Network Sharing Examples

Australia: Network sharing did not block subsequent consolidation between unrelated parties
Experience from Australia shows that a RAN sharing deal does not block a subsequent merger with a competing operator
Market Context Australia is a large country with an extremely low population density where access to the 800 / 900 MHz frequencies is essential to compete because building geographic coverage is costly. It was also difficult to achieve scale economies because Australia has a population of only 21 million and had four licensed operators. RAN Sharing Agreements Australias four mobile operators RAN sharing agreements 2004, one between Optus and Vodafone, and the other between Telstra and 3. The Australian incumbents, Telstra and Optus, had a significant coverage advantage, but accepted the deals because of the expertise and procurement scale of Vodafone and 3.
In 2004 Telstra and 3 formed a JV to jointly own and operate 3s

Subsequent Merger Between Vodafone and 3 In February 2009 Vodafone and 3 agreed to merge the operations in Australia. A key ingredient of the synergies to be achieved is the roaming deal between 3 and Telstra in the 800/900 MHz band where "3" is roaming on Telstra. However Vodafone pursues build-out and 3s customers will be able to use Vodafones network. As a result Vodafone and "3" secure long-term competitive position in this relatively small (from a population perspective) market. The JVs are reported to keep running despite merger with "mid-term adjustments to realise network savings" (Vodafone and "3").

existing 3G radio access network and fund future network development. 3s radio access network was the core asset of the JV. In return for the 50 per cent ownership of the asset, Telstra paid Hutchison $450 million.
Also in 2004, Optus and Vodafone agreed to share a single set of

2004 RAN Sharing JV

2009 Vodafone & 3 Merger

3G antennas and feeders and co-locate the two carriers' 3G base stations in a single equipment shelter. This type of site was deployed in the inner areas of Sydney and Melbourne. Shared network sites use a single set of 3G antennas and feeders and share a 3G base station. Optus estimated its capex would be reduced by AU$100 million in the first three years, compared to a "do it alone" approach of rolling out 3G. Operating expenditure for maintenance, operations and site leases was expected to be reduced by approximately AU$10 million per year.

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Network Sharing Examples

Three way tower sharing deal in India

In India a three way Joint tower site venture was established as a separate company with potential future stock exchange listing in mind.
Market Context India is a vast country with a rapidly growing mobile market. The government is keep to foster mobile penetration growth and bring telecommunications to rural communities at price point acceptable for Indian consumers. The parties to the agreement were:
Vodafone Essar, Vodafones India operation has a market share

Indus Towers Indus Towers Limited provides Shared Telecom Infrastructure services to all telecom operators in the wireless space and other wireless service providers such as broadcasters and broadband service providers. Our commitment towards continuous innovation endeavours, optimization of future tower rollouts, enhanced operational efficiencies - leading to substantial cost savings for its customers. Source: Indus Towers

18% with 62.6 million customers as of January 09, operating in 16 out of Indias 22 circles (licence regions).
Bharti Airtel was is one of the leading operators in India with a

market share 23%, amounting to 87.4 million customers as of January 09.

Aditya Birla Telecom Ltd operating under the Idea brand is a

42%

smaller player present in fewer circles. Scope and Nature of Agreement In December 2007 an agreement was made among the three operators to put 70,00 mast sites into a joint venture while retaining own transmission equipment. A joint venture company Indus Towers was established with potential future stock exchange listing in mind. At the time of the making the agreement it was announced that 50,000 additional towers will be built over next 2 to 3 years. By May 2009 Indus Towers had already 95,000 sites operational. It claims to be the worlds largest tower company. Rationale For Vodafone, Airtel and Idea the JV will deliver:
Reduced capex requirement for increasing coverage Accelerate wireless coverage across the country, particularly in

42%

16%

Indus Towers does not only provide site services to its shareholders but also counts other Indian telecoms operators among its clients, including:
Tata Teleservices Reliance Communications BSNL

rural areas
Reduced network opex, notably in network maintenance

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Network Sharing Examples

Two partner sharing deal in Pakistan grows to three partners

In Pakistan a two way deal was extended to include a 3rd operator
Market Context Ufone was established in 2001 and is backed by Etisalat. Telenor was set up in 2005 by the Norwegian Telenor Group. With a population coverage of 21% in 2005, Telenor trailed ufone in terms of coverage by around 10% points in 2005. Scope and Nature of Agreement In 2006 an agreement was made between Ufone and Telenor for a nationwide site sharing agreement with a duration of 10 years. The main aims were:
Expand coverage of highways and sparsely populated towns Alleviate network bottlenecks in key urban centers

Rationale The deal is expected to deliver 50% CAPEX saving (ufone estimates) in a market that is heading for maturity. In order to reach more marginal populations the cost of coverage has to be brought down. Subsequent Development Warid later joined the agreement. However, Mobitel the leading mobile operator did not join.

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Network Sharing Examples

Zain and Mobily in Saudi Arabia: National roaming and site sharing
Zain and Mobily in Saudi Arabia: Site sharing and national roaming
Market Context Mobily had launched in 2004 (35% owned by Etisalat Group) and had a market share of around 40%. Mobily had 95% of population. Zain KSA (25% owned by Zain Group) acquired its licence in April 2007. It was looking for a national roaming agreement and a site sharing agreement to roll-out faster. An agreement was reached in November 2007. Scope of Agreement The agreement between Zain and Mobily covered:
Passive sharing of towers in areas of overlapping coverage. National roaming to complement Zains own network coverage.

The national roaming to be reduced progressively as Zains own coverage will increase over period of 3-5 years.
2G and 3G technology.

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