Network sharing: winning approaches and strategies sharing: winning approaches and strategies MNOs...

APAC Telecoms Summit 2014: Enabling innovation, driving profitability © Analysys Mason Limited 2014

Network sharing: winning approaches and strategies

APAC Telecoms Summit 2014:

Enabling innovation, driving profitability

14 January 2014

EVENT PARTNERS:

Network sharing: winning

approaches and strategies

Rohan Dhamija


Network sharing: winning approaches and strategies 2

Infrastructure sharing approaches and strategies

Outlook of infrastructure sharing for the APAC region

Impact of infrastructure sharing on operators’ profitability

Case studies



MNOs have recognised the realisable network cost reduction and other competitive benefits of network sharing

3

Benefits

of network

sharing

Geographical

expansion

Reduction in

deployment

cost – capex

savings Opex

savings –

sharing of

network

costs

Improved

focus on

core

business

Faster time

to market

and new

technology

roll-out

Network

optimisation

Investment

required to roll out

3G/4G networks

can be reduced

Significantly reduce

time to market

Can fix site opex costs

and protect operators

from cost variability

Savings across

network opex including

site costs, O&M,

planning, HR and so

on

It gives operators access to

cash in the short term for

investments

Cost efficiencies gained can

help operators get greater

return on investments

Operators can focus

on their customers

through investments

and targeted services

Network sharing

can allow operators

to optimise existing

networks to

increase

efficiencies

Return on investment

for rural areas can be

realised



The definition of network sharing can vary depending on the level of sharing

4

Active sharing: RAN sharing

No sharing Passive (site)

sharing Services sharing

Backhaul sharing

Increased cost savings

Active sharing: spectrum

sharing

Joint planning Joint planning Separate planning

Separate planning

Joint planning

Shared sites Shared sites Shared sites Shared sites Separate sites Shared sites

Separate spectrum

Separate spectrum

Separate spectrum

Separate spectrum

Separate spectrum

Shared spectrum

Separate base stations

Separate base stations

Network sharing Separate

base stations Separate

base stations Network sharing

Separate core network






Increased network sharing

Active sharing: deeper (core)

sharing

Shared backhaul Shared backhaul Shared backhaul Separate backhaul Shared backhaul Separate backhaul

Joint planning

Shared sites

Shared spectrum

Network sharing

Shared core network

Shared backhaul

Separate planning

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Towers or masts

Civil works, security

Passive infrastructure sharing involves multiple telcos sharing the same tower, shelter and electrical elements

5

Shelter

Feeder

Antennas

Microwave antennas

for backhaul

Telco 1

Telco 2

Telco 3

Telco 4

BTS

Power

Typical 50m ground-based tower (GBT)

shared by four telcos

Components

Type of

network

sharing

Share of

capex

Antenna and feeder Active 6%

Microwave backhaul Active 10%

BTS Active 11%

Tower or masts Passive 24%

Shelter Passive 10%

Electrical Passive 19%

Civil works, security Passive 21%

Illustrative tower/RAN capex split

for an operator

Passive infrastructure



Another common form of network sharing involves offering limited active sharing through fibre backhaul sharing

6

Fibre connectivity for operators

▪ High data usage on technologies such as

LTE cannot be supported on microwave and

thus operators will need fibre backhaul to

connect their BTSs

– Flexibility in commissioning fibre backhaul

capacity as and when traffic increases on

particular sites can provide a significant

advantage to operators in terms of QoS and

cost management

▪ Operators can share backhaul when towers

are already being shared. The network

deployed by one operator can be shared by

all others to follows

▪ Tower companies can either deploy their own

fibre or lease fibre from a third party

bandwidth provider to connect their towers

with fibre backhaul



Operators are also sharing network planning and design support services, and towercos are offering this option

7

Network planning and design Some towercos are providing network

planning and design services to operators

mostly provided for small operators who do not want to

keep full time staff for network planning and design

also allows the operators to maintain a minimum SLA

when towercos manage the network planning

New operators also benefit from the towerco’s

knowledge of RF holes and dense urban

capacity patterns

Joint planning by operators is optimally suited

for new technology rollouts. However, shared

planning will have the disadvantage of lack of

differentiation of operator networks in terms of

network presence



Towercos’ offerings are very similar, and include a range of services from network planning to operations and maintenance

8

Service offering STP Protelindo Tower

Bersama

SBA

Commn

Crown

Castle

American

Tower GTL

Indus

Towers

Viom

Networks

Network

planning or site

selection

Site acquisition

Site construction

(build to suit)

Network

installation

Site

maintenance

Service offerings by various players across markets



More complete forms of active sharing involve different levels of RAN sharing and/or full network sharing

9

Passive sharing 1 Backhaul sharing 2 Active: RAN sharing 3 Active: core/spectrum sharing 4

Core Transmission

BSC n

BSC 1

MSC 1

Deep passive

sharing

(microwave)

Backhaul

(fibre)

IP ring

PoI

Link

PoI

Link

Spectrum

Cabinet

BTS

Tower

OSS / BSS

3.3

2

3.2

3.1

3.4

4.2

4.1

1.1

1.2

Access

1.3



Unlike passive sharing, active infrastructure has more regulatory and operation implementation challenges

Challenges

for active

sharing

arrangements

Telcos

constrained

in ability to

differentiate

Regulatory

impediment

Most regulators typically do not allow for spectrum

sharing, hence restricting full active sharing. This

implies that telcos will need to look at partial active

sharing models

Operators differentiate themselves on the basis of

network coverage and quality of service and sharing

a network reduces their opportunity to differentiate

Differentiate on

targeted services

and platforms rather

than coverage

Access to

competitor’s

confidential

information

Active sharing gives operators access to each other’s

costs, operations, technology and other key data

May also provide opportunities for collusion on

pricing, service packages and network development

Outsourcing to

neutral third party

that can facilitate and

manage the whole

process

Difficult to implement active sharing in brownfield

deployments where telcos have already invested in

independent networks and planned network roll-outs

Operational

challenges

1

2

2.2

When regulations

allow spectrum

sharing, it will

increase active

sharing agreements

Easier to implement

in new 3G and 4G

network roll-outs

2.1

10






Case studies



Different countries in the APAC region are at different stages of active and passive infrastructure sharing

12

Model

Passive

Active Description

India

Passive infrastructure sharing in India started after 2006 after entry of independent towercos

such as GTL and creation of captive towercos such as Bharti Infratel and Indus towers

Currently, majority of operators have passive infrastructure deals with towercos; active

sharing has not picked up yet

Indonesia

Independent towercos started in Indonesia around 2003-04, but passive infrastructure sharing

among operators picked up after 2006–2007

Operators sold their tower assets to the independent towercos and now rely on ITCs for their

future tower demand (through co-location or build-to-suite); active sharing has not picked up

Malaysia

Until recently, operators used to enter into bilateral non-commercial arrangement of passive

infra sharing but now with the creation of an independent towerco by Axiata, operators would

be forced to enter into commercial sharing arrangements with each other

Some operators have announced active sharing deals but the level of execution is not certain

Bangladesh Infra sharing is not very popular in Bangladesh with operators entering into bilateral sharing

for some of their sites under mutually agreed upon rentals and services. Active sharing is not

started yet

Pakistan Operators have started sharing passive infrastructure for some of their sites with other

operators; active sharing is not started yet.

Level of sharing

Key: Nil Low Medium Medium/high High



In India, infrastructure sharing models have evolved from simple bilateral passive to multilateral sharing arrangements

Pre-2006

Bilateral sharing

Two telcos agree to give each other a slot on their own sites

Transaction occurs under a barter system, with no cash payments

2007 onwards

Independent

tower companies

Telco-promoted

tower companies

Telco hives off its passive infrastructure into an independent towerco

Multiple telcos can also pool their towers to form a JV

2006

Independent tower companies that build passive infrastructure, either proactively or based on telco demand

Telco 1 Telco 2

Telco 1

Telco 2

Owned by

Telco 1

Telco 1

Telco 2

Owned by

independent

company

Owned by

JV

Telco 1

13

Telcos will look to share active elements of the network (BTSs, antennas, feeder cables) for new network roll-outs

2012 onwards

Independent / telco

tower companies

Telcos

share

BTSs

Active

sharing

Multi

modal

antennas

2010–2011:

ICR arrangements



Active sharing in brownfield deployments is difficult, so most sharing has occurred on the passive infrastructure side only

▪ Active sharing is easier to be adopted in case of

greenfield deployment in which none of the operators

sharing equipment already have presence in the

proposed area. There exist a number of operational

challenges while adopting active sharing in case of

brownfield deployment

▪ Indian incumbents have already invested in independent

networks and may not be willing to compromise their

differentiation in terms of network coverage by sharing

active infrastructure with a new operator

▪ In addition, lack of clarity on regulatory policies does

not incentivise operators to share their active equipment

14

Existing

network

Existing

network

Consolidated

network +

Op A

Op

B

No

network

No

network

New shared

network +

Op A

Op B

Active sharing business models

and challenges in India

Greenfield network

deployment

Brownfield network

deployment

After its introduction in 2006, passive infrastructure

sharing started gaining traction with the towers spinoffs

by large operators such as Bharti Airtel, Vodafone, Idea

Cellular and RCOM

Bharti Airtel and RCOM spinoff their towers to create two

independent companies Bharti Infratel and RTIL respectively

Later Bharti Infratel merged some of its towers with

Vodafone’s and Idea Cellular’s towers to create another

independent towerco Indus Towers

Other independent towercos such as GTL Infra and ATC

also started proactively deploying towers to cater to the

coverage expansion needs of new operators which

entered the market in 2008/2009

Also, a number of independent towercos in India have

grown inorganically by acquiring towers of telecom

operators or other independent towercos

Viom networks and GTL infrastructure expanded their tower

base by acquiring tower assets of operators such as Tata

teleservices, Spice telecom and Aircel

Ascend Telecom and American towers acquired other smaller

independent towercos to expand their tower portfolio

Growth of passive infra sharing in India



The tenancy ratio in India has increased to ~1.7 in 2012 as a result of operators favouring infrastructure sharing

15

Airtel

Vodafone

Indus Towers

Bharti Infratel

Idea owned

Vodafone owned

Idea

RCOM RTIL2

Tata Teleservices

Viom Networks

GTL

Uninor

Aircel

Independent

TowerCos3

Other new

operators

All circles

All circles

All circles

Share of total

demand

Operator owned

TowerCos

Other new

operators

Share of total

demand

Operator partnership with towercos (RoFR1 agreements)

BSNL/MTNL Own Towers All circles

Op

era

tor-

ow

ne

d to

we

r

co

mp

anie

s

Ind

ep

end

ent to

we

r

co

mp

anie

s

▪ Passive infrastructure sharing reduced the need for new

tower builds, and progressively these towers are being

divested into separate towercos in India. This has also

been necessitated by margin pressures for operators as

well as directives by the regulator

▪ Overall, the industry is favouring colocations than new

builds as it reduces the time-to-market for operators

while increasing margins and reducing capex

deployment for ITCs

– This was more beneficial to the new operators who

entered into the market at the time when incumbents

already completed most of their network coverage

Tenancy BTS

(2013): ~950k

Total towers

(2013): ~500k

Tenancy ratio

(2013): 1.90

Tenancy ratio of telecom towers in India (2013)



In Indonesia, sharing is largely limited to passive infrastructure, which has gained significant traction in the past few years

16

With tower sharing largely non-existent in Indonesia

until 2006–2007, the initial phase of network rollout of

operators (mostly 2G network expansion) involved

new tower construction for most BTS deployment

traditionally, all towers required for mobile

operators’ network expansion were built by

operators themselves

as a result, captive tower arms of major operators

account for more than 74% of all towers in the country

ITCs started in 2003–2004 in Indonesia, with the

establishment of Tower Bersama and Protelindo

Since then, they have grown organically through new

tower construction, as part of build-to-suit (B2S)

contracts, as well as through acquisitions to achieve

critical mass

Smaller operators such as Hutch, Bakrie and

SmartFren have favoured sale-and-leaseback of

towers to enable them to focus on their mobile

services and release capital

Owner Estimated 2Q 2013 towers

Mitratel 4.3

Telkomsel 22.5

Indosat 8.3

XL Axiata 10.0

Axis 1.6

Protelindo 9.5

Tower Bersama 7.9

STP 3.1

Others 4.5

Total 71.7

Tenancy BTS

(2Q 2013): ~119k

Total towers

(2Q 2013): ~72k

Tenancy ratio

(2Q 2013): 1.65

Tenancy ratio of telecom towers in Indonesia (2Q 2013)



Operators’ initiatives to divest their tower assets to towercos and to limit their new tower deployment has driven growth

▪ Operators (except Telkom Group) have stopped building

new towers and seek to free up capital by selling towers

▪ Protelindo, Tower Bersama and STP have led this

acquisition drive and now account for ~88% of all towers

owned by ITCs

▪ ITCs have also managed to increase their tenancies to

~1.7–1.8 compared with less than 1.5 on average for

captives

– ITCs have managed to leverage tenancy demand from

smaller telcos as well as from incumbents

– moreover, acquiring towers from a captive towerco resulted

in assured anchor tenancies from the operator

17

Recent major M&A deals in the Indonesian tower space

Year Buyer Seller Towers

2008/

2009 Protelindo Hutch 3217

2008 STP Bakrie Telecom 540

2010 Tower Bersama Indonesia Tower 1380


2011 Tower Bersama Infratel 263


2011 PT Inti Bangun

Sejahtera (IBS) SmartFren 705

2011 PT Inti Bangun

Sejahtera (IBS) DSS (Smartfren) ~1100

2012 Tower Bersama Indosat 2500

2012 Protelindo CI & MKP ~200

2012 STP

Nurama Indotama

& PT Demeta

Telnet

~240

2013 STP Hutch ~300

2013 STP Inti Samudera

Pasai

~500–

600

Operator Approach

Telkomsel

Reportedly progressively transferring towers to its

Mitratel subsidiary, with a plan to spin it off as a major

ITC

Indosat Actively divesting towers

XL Axiata Seeking to divest towers, but is intent on extracting

maximum valuation for its portfolio

Smaller

operators These have sold the vast majority of their towers



In Malaysia, operators are adopting active network sharing models in addition to sharing legacy passive infrastructure

18

Passive infrastructure sharing

Tower sharing Backhaul sharing

Operator A’s

BTS

Operator A’s antenna

Operator B’s antenna

Operator B’s

BTS

Operator A’s tower

Operator B shares

operator A’s base

station

Operator B shares

operator A’s antenna

Independent tower

company (ITC) or state

backed company

(SBC)

Active sharing (RAN sharing)

Network Sharing in Malaysia

Operator A’s antenna

Operator B’s antenna

Operator A’s tower

A’s BTS

B’s BTS

Operator B shares A’s backhaul link

2

3

Malaysian operator strategies

To

we

r s

ha

rin

g

Celcom and DiGi have entered into MoU aimed at long term

infrastructure collaboration

Under the deal, the Telcos will not only share tower sites,

but will also undergo RAN, transmission and O&M sharing

Ba

ck

ha

ul s

ha

rin

g

WiMAX operator YTL / YES has signed a wholesale

Ethernet service and master tenancy for infrastructure

sharing agreement with Telekom Malaysia

Under the 15-year agreement YTL will be able to utilise

TM’s nationwide wholesale Ethernet service for backhaul

purposes

Acti

ve s

hari

ng

U Mobile has entered into a ten-year deal in which it will

share Maxis' 3G Radio Access Network (RAN)

Maxis expects to receive monetise its infrastructure, while it

improving the utilisation of its network in those areas that are

currently underutilised

1

2

3

1



Legacy bilateral agreements are giving way to creation of independent tower companies with normal tenancy rentals

▪ Celcom, Maxis and DiGi have large base of towers to choose from to deploy their new BTSs under

CSU agreement. However, after even one operator exits the CSU arrangement, the other operators are

also expected to follow.

▪ Changes in regulatory guidelines are also expected to stop the practice of CSU arrangements and

tower owners would start charging rentals for tenancies.

19

CSU options with DiGi and Maxis before

formation of Axiata towerco

Creation of Independent towerco would change

CSU dynamics in the country

Maxis, Digi and

Celcom share

towers through

bilateral

agreements

Towerco



2Q

200

5

1Q

200

6

4Q

200

6

3Q

200

7

2Q

200

8

1Q

200

9

4Q

2009

3Q

201

0

2Q

201

1

1Q

201

2

Subscribers ARPU (USD) ARPM (USD)

Drivers of network sharing in Bangladesh include a growing subscriber base and pressure on margins

20

Bangladesh’s 6th

operator - Warid

received GSM license

in December 2005

Pre 2005 Post

2012

Su

bscri

bers

A

RP

M

AR

PU

C

om

peti

tio

n

Evolution of Bangladesh’s mobile telephony market Competition

expected to intensify

with New Entrant

receiving 3G (and

potentially 2G)

concessions in 2013

Threat to ARPU with

entry of Airtel and

New Entrant.

Introduction of 3G

might provide

upward support

ARPM is expected to

follow the current

trend, as competition

intensifies in the near

term

Subscribers

expected to increase,

implying pressure on

operators to grow

network coverage for

3G

Warid launched

GSM services in

Bangladesh in

May 2007

Bharti Airtel

acquired 70%

stake in Warid in

January 2010

Legacy players

launched in

1997, CityCell

followed in 1999

and Teletalk in

2004

Historically

ARPUs were

high in

conjunction with

high ARPM

ARPM high due

to lack of

competition and

competitive

offerings

Market

penetration one

of the lowest in

the world

Negative market development

Neutral market development

Positive market development

4.9

million

103

million

USD

12.1

USD

2.2

USD

0.01

USD

0.07



Passive infrastructure sharing has begun in Bangladesh, and sharing of backhaul is a growing phenomenon

21

Regulatory overview of infrastructure sharing in Bangladesh

Infrastructure

sharing

Active or RAN

sharing

Passive or site

sharing

According to the BTRC, operators can enter into

bilateral agreement for sharing passive infrastructure

Operators may also jointly develop, build, maintain and

operate new passive infrastructure for providing

telecommunications services to subscribers

However an individual operator can build passive

infrastructure with the permission of the BTRC only

BTRC does not currently permit active or RAN sharing

Backhaul or

transmission

sharing

Operators may jointly or individually develop, maintain

and operate optical or wired backbone transmission

infrastructure network if NTTN1 operators fail to provide

such transmission services to them

The telecom operators may also sell or lease the

excess capacity, core or fibre of the transmission

network to the NTTN1 operators

Grameenphone and

Banglalink share

passive

infrastructure in rural

areas of Bangladesh

Robi Axiata Ltd has

recently signed a

bilateral transmission

network sharing

agreement with

Summit

Communications

(NTTN operator)

NA



In Pakistan, there is no active infrastructure sharing and only 15–17% of sites are hosted on shared towers

22

Until now, operator-led initiatives to promote passive

infrastructure sharing have failed to generate sufficient

traction in Pakistan. Active infrastructure sharing has not

been allowed by PTA

As a result, only 15–17% of the total sites deployed by

the operators being deployed on towers owned by other

operators

All operators have been building their own towers as they

expand their network coverage. As a result, there exist

dense clusters of towers in highly populated regions such

as Islamabad and Karachi

No independent towerco has been established till date in

the country because of operators’ lack of interest in

sharing their infrastructure

However, operators may start focusing on sharing their

passive infrastructure as they start rolling out 3G/4G

network in 2014 after the proposed auction of spectrum in

March 2014

Also with operators increasingly focusing on opex

optimisation driven by competition and declining ARPUs,

passive infra sharing could see some traction in the

following years

Tenancy BTS

(2012): ~34k

Total towers

(2012): ~29k

Tenancy ratio

(2012): 1.17

Tenancy ratio of telecoms towers

in Pakistan (2012)

• As a result of the push by PTA to promote

passive infrastructure sharing, all five

operators signed an MoU to share cell sites

and improve tenancy ratio

• PTA has set a tenancy ratio target of 1.2, 1.3

and 1.5 for first three years respectively

starting 2012






Case studies



Sharing increases profitability, but it is easier to share passive than active infrastructure (except in a greenfield deployment)

24

Types of network sharing deal (%)

Passive share 46%

RAN share 38%

Deep active

sharing 8%

National roaming

4%

Merger 4%

Passive sharing Active sharing

Capex savings through sharing

of deployment costs

Opex savings through sharing of

security, maintenance

Faster time to market

RoI in rural areas

Network optimisation

Capex savings through sharing

of deployment costs

Opex savings through sharing of

network costs

Faster time to market

RoI in rural areas

Network optimisation

Ease of implementation

Historical competitive advantage

due to geographic coverage not

seen any more

- +

Active and passive sharing both drive savings;

Passive sharing is easier to implement

Globally, network sharing deals have been driven by

passive sharing so far – though RAN sharing has been

increasing of late

Most recent active sharing deals have focused on 3G

and LTE roll-outs (primarily greenfield roll-out or

expansion)

For example, Tele2 and Telenor jointly rolled out a

greenfield LTE network; 3 and Telenor share their 3G

network completely in rural areas while maintaining

separate networks in urban areas

Ease of implementation only

applicable to greenfield

deployment

High complexity with several

variants (for example, 3G

sharing but not 2G)

Restricted or complicated exit at

later stage



Operators are able to unlock the value of tower assets through carve-out to an independent tower company

25

▪ Operators look to unlock value from their existing tower

portfolios by carving out towers to third-party independent

tower companies

▪ Due to competitive issues between various operators, there

are issues in co-locating BTS of various operators on a

tower owned by an operator

▪ By transferring the tower assets to a third-party tower

company, operators become more comfortable in co-locating

their BTS on these towers as they do not expect preferential

maintenance of BTS

▪ The tower provider will also market the tower assets in order

to increase the tenancies and provide tower space to all

operators irrespective of their market share or competitive

positioning between the operators

▪ Since tenancies drive the revenues for tower companies, a

higher tenancy post carve-out is able to unlock the value of

the tower assets

▪ Carving out towers for passive sharing is always beneficial

from a tenancy increment perspective than bilateral sharing,

as the tower assets after carving out could be used by any

and all operators present in the market

BSC n

BSC 1

MSC 1 IP

ring

PoI

Link

PoI

Link

OSS / BSS

Operator A does not share tower with Operator B

because of competitive dynamics

Operator A

BSC n

BSC 1

MSC 1 IP

ring

PoI link

PoI link

OSS/BSS

BSC n

BSC 1

MSC 1 IP

ring

PoI link

PoI link

OSS/BSS

Opera

tor

A

Opera

tor

A

Opera

tor

B

Operator B

Operator A

Operator B starts using tower assets of Operator A

after carve-out to an independent tower company

Carve-outs 1



The need to raise cash has encouraged operators in highly competitive markets such as India and Indonesia to carve-out

26

ARPU1 (USD) change between 2007 and 2011

0

20

40

60

US

A

UK

Ita

ly

Nig

eri

a

Gha

na

Ru

ssia

Indon

esia

India

Dec-11 Dec-07

Countries in Asia such as India and Indonesia,

have witnessed more passive infrastructure

carve-outs due to lower ARPUs for operators in

these markets

Cash raised through carve-outs is subsequently

used for network investments

0.0

1.5

3.0

4.5

6.0

7.5

9.0

Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012

Aircel (India) Indosat (Indonesia)

ARPU for sample operators who divested their

towers

Aircel started facing margin pressure in 2008 with

the entry of many small operators in India

Margin pressure in a highly competitive market as a

result of decreasing ARPU forced Aircel to sell its

tower assets to GTL in January 2010

Similarly, Indosat divested part of its tower assets

to Tower Bersama in February 2012

Sold its

towers in

Jan 2010

Sold its

2500 towers

in Feb 2012

Carve-outs 1



However, the value unlocking through carve-out also impacts the operator’s EBITDA margins

27

40.6% 41.0% 40.8%

35.5%

30.7% 30.2% 31.4% 31.5%

QE

-Jun

07

QE

-Sep 0

7

QE

-De

c 0

7

QE

-Mar

08

QE

-Jun

08

QE

-Sep 0

8

QE

-De

c 0

8

QE

-Mar

09

EBIDTA margin trend for Bharti Airtel

pre- and post-carve-out

In Dec 07 – Jan 08, Airtel entered into a JV

with other two incumbent private operators in

India to form an ITC, Indus Towers

Of total 52 000 towers, Airtel contributed

around 30 000 towers to form Indus Towers,

and rest were managed by its subsidiary

Bharti Infratel

Airtel transferred its tower portfolio into two entities, an

independent tower company and one of its subsidiaries

Airtel had to sign a commercial tower lease agreement

with these entities to access the tower sites at market

rates, which was ~INR20 000 (USD400) more than

the previous rentals booked by Airtel

QE-Dec 07 QE-Mar 08 QE-Jun 08

Total revenue USD1122 million USD1284 million USD1383 million

EBITDA margin (%) 40.8% 35.5% 30.7%

Reduction of 5% of

EBITDA margin -- USD68 million USD66 million

Number of towers 48 000 53 000 58 000

Monthly site rental USD900 USD1100 USD1300

Site rental for QE USD130 million USD175 million USD226 million

Change in site rental

per quarter -- USD45 million USD51 million

Carve-outs 1

Reduction in EBITDA margin can be attributed to the increase in monthly site rental



The market structure and nature of demand have a stronger impact on ITCs’ decision to participate in the market

28

Drivers Emerging markets Developed markets

Relevance Effect Relevance Effect

Commercial Coverage Capacity for voice traffic Capacity for data traffic

Market structure Fixed wireless entrants Mobile data entrants

Technical 3G roll-out WiMAX/LTE roll-out / / Multi-technology/band equipment Availability of rooftops

Regulatory Rural broadband targets

Positive impact Neutral impact Negative impact Medium–high Nil Low Medium High Key:

Independent towercos 1






Case studies



Network sharing deals worldwide [1]

Country Year Operators Networks Type of sharing Scope Operating Model

Australia

2005 Telstra and 3 3G RAN share Site and RAN sharing and partly shared

core network (MSCs, VLR and SGSN)

JV (3GIS Pty Ltd) established to

own/operate existing RAN and

fund future network investment

2005 Vodafone, Optus 3G RAN share

Site collocation, access, shared infra

rollout, transmission, O&M, admin

service

Network installed held through an

unincorporated JV

2009 Vodafone and 3 NA Merger

Merger – JV market its products and

services under Vodafone brand, and

retain the exclusive rights to the 3 brand

Merger into a 50:50 JV, VHA

Bangladesh 2008 Citycell and Warid

Telecom RAN share

BTS including towers, poles, transmitter

equipment and bandwidth Sharing agreement

Belgium 2009 Mobistar and Base NA Passive share Jointly acquire and build new sites Sharing agreement

Canada

2009

Data & Audio Visual

Enterprises Wireless and

Roger Communications

NA National roaming

National roaming on Rogers' network

outside DAVE Wireless's coverage

areas (10 urban locations)

Sharing agreement

2009

Data & Audio Visual

Enterprises Wireless

and Bell Mobility

NA Passive share

Site-sharing agreement. Entitles DAVE

to request co-location on Bell sites

where sufficient space is available

Sharing agreement

2008 Bell Mobility, TELUS 3G RAN share Build HSPA network jointly; includes

spectrum sharing

50:50 JV for roll-out of shared

HSPA network overlaid on existing

networks, sites placed on 1:1 basis

Denmark 2011 Telia, Telenor 2G/3G/LTE RAN share

Share antennas, towers and

transmission equipment. Does not

involve core networks

Establish common infra company

to build joint network; build new

towers

Germany 2009 Telefonica (O2) and

Vodafone 2G/3G Passive share

Share existing 2G and 3G sites, mast-

sharing for microwave backhaul Sharing agreement

India 2007 Bharti Airtel, Voda, Idea NA Passive share Transfer around 70,000 mobile mast

sites Independent JV, Indus Towers

Ireland 2009 Telefonica (O2) and

Vodafone NA Passive share

Share existing sites; jointly build new

site where roll-out plans aligned Sharing agreement

30



Network sharing deals worldwide [2]

31

Country Year Operators Networks Type of sharing Scope Operating Model

Italy 2005 Telecom Italia and

Vodafone NA Passive share

Network planning and development to

remain autonomous Sharing agreement

Morocco 2008 Wana and Meditel NA Passive share 1st phase to include over 400 sites Sharing agreement

Pakistan 2006 Telenor, Ufone, Warid,

Paktel NA Passive share Agreed to share sites and towers Sharing agreement

Qatar 2008 Vodafone, Qatar

Telecom NA Passive share Bilateral outdoor site sharing Sharing agreement

Spain

2006 Vodafone and Orange 3G RAN share Base station sharing in remote rural

areas Sharing agreement

2009 Vodafone, Telefonica 2G/3G Passive share

Extension of a pre-existing site-sharing

agreement, to cover masts and

cabinets, along with power supply

Sharing agreement

Sweden

2001 Telenor (previously

Vodafone) and 3 3G RAN share

Shared network to account for 70%

coverage

JV - 3G Infrastructure Services

(3GIS)

2009 Tele2, Telenor LTE Deep active

sharing

Construction of joint LTE network and

sharing of 900MHz and 2.6GHz

spectrum; extension of GSM network by

30-50%

50:50 JV called Net4Mobility; Two

operators are MVNOs on the

jointly-owned network

2001 Tele2 and TeliaSonera 3G Deep active

sharing

Includes nationwide network of more

than 4,700 base stations, core network,

and a common VLR

50: 50 JV named Svenska UMTS-

Nat; JV owns 3G licence and

network; operators act as MVNOs

UK

2007 T-Mobile and 3 3G RAN share

Share masts and 3G access networks

including antennas, transmission,

RNCs; excludes core, 2G networks,

spectrum

50:50 JV , MBNL to supervise the

operation of the joint 3G network

2007 Vodafone and Orange 2G/2G RAN share

Deal covered both existing and new

builds of the 3G networks; 2G to be

included later

JV proposed but not set up

2009 Vodafone and O2 NA Passive share Share sites, cabinets and power supply; JV - Cornerstone



Most of these deals have tended to focus on passive network sharing, although RAN share is increasing

32

Types of network sharing deal (%)

Passive sharing still forms

more than half of the

benchmarked international

network sharing deals

However, more operators are

moving into RAN share –

especially following the

advent of more-advanced

MORAN equipment

46%

38%

8%

4% 4%

Passive share RAN share

Deep active sharing National roaming

Merger



Recent deals have focused on 3G and LTE deployments, with the core drivers being cost savings and faster roll-outs

Country Year Operators Networks Expected benefits Joint

Bidding?

UK 2007 T-Mobile, Hutchison 3G Overall saving of USD3.2 billion over 10 years by

cutting 5000 phone masts No

Australia 2004 Vodafone, Optus 3G ~USD530 million deal to share costs of the

network enabling faster roll out and efficiencies No

Canada 2008 Bell Mobility, TELUS 3G Provide coverage of remote and rural areas;

compete better against Rogers No

Sweden 2009 Tele2, Telenor LTE

Improved coverage for voice calls across the

country; network speeds 10–15 times faster than

those at the time of the deal

Yes

Hong Kong 2009 PCCW, Hutchison LTE Enables telcos to focus less on network coverage

and more on services and branding Yes

Spain 2006 Orange, Vodafone 3G Orange expects savings of ~USD94.9 million per

year; improved 3G coverage by 25% No

Russia 2011 Yota, MTS, MegaFon,

Rostelecom LTE

Rostelecom and Megafon expect to save ~30% of

the expenses compared to own network roll-out No

UK 2007 Orange, Vodafone 3G Savings in capital and operating spending No

Denmark 2011 Telia, Telenor 2G/3G/LTE

Reduce both companies' spending on mobile

infrastructure; expand the joint network more

quickly

No

33



Contact details

34

Rohan Dhamija

Head, India and South Asia

[email protected] Cambridge

Tel: +44 (0)1223 460600

Fax: +44 (0)1223 460866

[email protected]

Dubai

Tel: +971 (0)4 446 7473

Fax: +971 (0)4 446 9827

[email protected]

Dublin

Tel: +353 (0)1 602 4755

Fax: +353 (0)1 602 4777

[email protected]

Johannesburg

Tel: +27 11 666 4786

Fax: +27 11 666 4788

[email protected]

London

Tel: +44 (0)20 7395 9000

Fax: +44 (0)20 7395 9001

[email protected]

Madrid

Tel: +34 91 399 5016

Fax: +34 91 451 8071

[email protected]

Milan

Tel: +39 02 76 31 88 34

Fax: +39 02 36 50 45 50

[email protected]

New Delhi

Tel: +91 124 4501860

[email protected]

Paris

Tel: +33 (0)1 72 71 96 96

Fax: +33 (0)1 72 71 96 97

[email protected]

Singapore

Tel: +65 6493 6038

Fax: +65 6720 6038

[email protected]

Boston

Tel: +1 202 331 3080

Fax: +1 202 331 3083

[email protected]

Manchester

Tel: +44 (0)161 877 7808

Fax: +44 (0)161 877 7810

[email protected]

Date post:	13-Mar-2018
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