Deeper forms of network sharing will bring new challenges.

New round of network sharing in fixed and mobile markets

Network sharing between mobile operators has been a key trend in the last five years to cut network footprint. These deals have become popular with operators of all sizes. The first three months of 2012 saw new deals struck in many markets and existing relationships deepened, with operators in Central and Eastern Europe leading the way.

Figure 4. Network sharing deals announced in Q1 2012

Regulators in many markets are broadly in favor of such moves, recognizing that the cost benefits that result from joint deployments can only help operators to meet national broadband targets.

In the mobile sector, collaboration can also offset the effects of spectrum shortages. Meanwhile, governments in countries such as Russia and Kenya are starting to back collaborative approaches to LTE.

Looking ahead, new challenges will appear as network sharing deals proliferate within markets and across industry sub-segments. Operators need to revisit established relationships and preserve as much flexibility as possible in their infrastructure roadmaps as coverage requirements and site density considerations continue to evolve.

Increased collaboration between fixed and mobile players

Along with the need for rural broadband coverage comes an increased scope for collaboration between fixed and mobile players. Deeper forms of network sharing will bring new challenges. In Russia, an LTE network sharing consortium formed last year led to an antitrust investigation, with disagreements over the valuation of the network potentially holding up plans by operators to secure stakes in the new network.

Beyond broad commercial and competition concerns, the release of new spectrum and repurposing of existing frequency bands will also affect infrastructure strategies and attitudes to network sharing in mobile. While the cost reductions and coverage benefits of network sharing are clear, network quality is still an important differentiator.

How operators balance their competitive credentials against the need for more rational market structures will do much to influence network sharing approaches in years to come.

LTE device shipments to grow, but challenges remain

Shipments of LTE-capable devices are expected to rise tenfold in 2012 compared to last year as 4G services come of age. Growth in LTE networks in the US and East Asia is catalyzing shipment growth this year. Europe still lags behind in LTE rollout but Samsung announced the launch of an LTE-capable Galaxy phone in Sweden – now the first European country with a 4G device.⁷

Figure 5. Global LTE handset shipment forecast

Despite the strong shipment growth expected this year, there are plenty of technical and commercial hurdles to be addressed. For example, battery life constraints may reduce customer satisfaction levels.⁸

Also, the lack of interoperability between LTE devices is proving something of a pain point. Early LTE smartphones available in the US operate in the 700 MHz band, but different band classes mean that devices from different operators are not, as yet, interoperable. T-Mobile highlighted this scenario in a recent representation made to the US Federal Communications Commission.

At the same time, European LTE auctions are taking place in the 800 MHz band. Add to this spectrum re-farming initiatives that will see LTE launched in additional frequency bands such as 1800 MHz and the issues of device compatibility and rising prices across the device ecosystem become clear.

There has been plenty of discussion about voice-over-LTE (VoLTE) smartphones to provide higher-quality voice calls and enable simultaneous usage of data services. VoLTE services are expected to debut in early 2013 in the US, but handsets supporting VoLTE have yet to because of the need to hand-off to 3G networks when users move outside of LTE coverage.

In addition, support for emergency calls — a regulatory requirement in the US — is another issue for operators and vendors to consider.

Fiber rollout gathers pace in Africa

The need for new infrastructure remains pressing. Some progress has been made in the last 18 months, as new undersea cables help reduce the cost of international bandwidth for many countries in the region. Policy-makers and operators continue to seek infrastructure improvements, and governments are helping lead the charge, supported by international funding.

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⁷"Sweden Gets Europe’s First Lte Smartphone,” PC World, 15 February 2012.

⁸"2012 US Wireless Smartphone And Traditional Mobile Phone Satisfaction Studies — Volume 1,” JD Power website, 15 March 2012.