“Why should larger operators help the smaller ones?”
Major operators could use LTE network sharing arrangements to squeeze smaller players out of the market, or force them to operate on disadvantageous terms, according to industry consultant Bengt Nordström.
Nordström, who heads up strategy consultancy Northstream, said that in Sweden 3 is being “marginalised” by Tele2 and Telenor’s LTE sharing agreement, with only TeliaSonera having the scale to go it alone.
“Why would the bigger players help the smaller player reach their customers and be more successful than they would be?” he asked.
“In Sweden, Telia can go on their own, then Tele2 and Telenor are roughly equal in size as the number two and three players and have combined for LTE. I think operators are viewing network sharing as a very strategic opportunity to squeeze competitors out of the market,” Nordström said.
3 Sweden has a 3G network sharing agreement with Telenor. In the UK, 3 currently has a 3G network joint venture with T-Mobile, which has of course just entered into a full joint venture with Orange. At the time of the merger, T-Mobile insisted its deal with Orange would not affect its network jv for 3G with 3 UK. But going forward to LTE?
A 3 UK spokesperson said that in his view LTE is the natural next step beyond HSPA coverage, and although there have been no announcements about LTE, he couldn’t see a good reason why 3 would want to migrate to LTE by abandoning its JV, and having to build out another network.
“I think there’s too much made of LTE, anyway,” the spokesperson said. “I’m not sure it’s that big a shift. Nor are we a small player when it comes to 3G, as we are the company with the largest 3G network,” he added.
As for Sweden, the spokesperson was of the opinion that 3 Sweden was outperforming the other operators, and that he’d “love to be where the Swedes are right now.”
In Denmark, 3 Denmark won the largest block of LTE spectrum, getting hold of 2x10MHz paired and 25MHz unpaired spectrum in the 2.5GHz band.
Nordström said that network sharing is critical for LTE because operators have realised that the business model means it is impossible for all but the biggest operators to go it alone.
“It’s as much about site, transmission and tower costs as it is the actual equipment costs,” Nordström said.
“There is an over-establishment of operators,” he added, “due to the over-inflated predictions 10 years ago for 3G. How operators deal with consolidation will be the biggest change for many over the next few years.”
And, in his opinion, it seems that muscling smaller operators out of the LTE game might be one way in which margin-squeezed operators seek to gain an advantage.