Vodafone UK and Telefonica UK to merge network infrastructure

7 Jun 2012

UK-based mobile giant Vodafone and Spain’s Telefonica have today announced that they are to strengthen an existing network partnership between their respective British subsidiaries, Vodafone UK and O2 UK. Under the plans, the two mobile network operators will jointly operate and manage a single network grid running two competing mobile voice and internet networks, with both retaining complete control over their own wireless spectrum, intelligent core networks and customer data. In order to facilitate the project, a new 50/50 joint venture company is to be created via the consolidation of the existing basic network infrastructure of each cellco, including towers and masts; upon completion both operators should have access to a single grid comprising around 18,500 masts, a figure that reportedly represents an increase of more than 40% for each of them.

Looking ahead, the JV will be tasked with organising the construction of any new sites needed to extend coverage into rural and remote areas. Further, it is expected that opportunities for decommissioning duplicate sites will arise, and the duo have suggested that there could be a more than 10% reduction in the total number of sites in operation. In terms of the design, management and maintenance of the radio equipment and local transmission, meanwhile, Vodafone and O2 will each take responsibility for one half of the country; O2 will manage and maintain these elements in the East (including Northern Ireland and most of Scotland), while Vodafone will look after the West (including Wales). The company has also confirmed that, in a similar fashion to the existing network partnership between the two companies – Cornerstone (see below) – all shared sites will continue to carry O2’s traffic on O2’s spectrum and Vodafone’s traffic on Vodafone’s spectrum. Indeed, both operators will continue to remain responsible for their own existing spectrum holdings and for fulfilling their own spectrum needs in the future.

In announcing the development, it has been claimed that the plan will benefit the UK’s mobile subscribers by creating two competing networks capable of offering 2G and 3G services to 98% of the population by 2015. In addition, it is claimed that the JV will ensure that the rollout of 4G mobile services occurs swiftly, and covers as wide an area as possible. Indeed, it is claimed that the partnership will ‘lay the foundations for two competing 4G networks to deliver a nationwide 4G service faster than could be achieved independently and up to two years before the anticipated regulatory requirement of 98% population coverage by 2017’. The operators are now understood to be in discussion with telecoms regulator Ofcom regarding the proposed tie-up, and it is suggested that, following a satisfactory outcome from those talks, the joint venture and network sharing arrangements could be in place later this year.

Commenting on the plans, Ronan Dunne, Telefonica UK CEO, noted: ‘This partnership is about working smarter as an industry, so that we can focus on what really matters to our customers – delivering a superfast network up to two years faster than Ofcom envisages and to as many people as possible. One physical grid, running independent networks, will mean greater efficiency, fewer site builds, broader coverage and, crucially, investment in innovation and better competition for the customer.’ Meanwhile, Vodafone UK’s chief executive officer Guy Laurence said of the development: ‘This partnership will close the digital divide for millions of people across the country and power the next phase of the smartphone revolution. It will create two stronger players who will compete with each other and with other operators to bring the benefits of mobile internet services to consumers and businesses across the country.’

As noted in TeleGeography’s GlobalComms Database, in March 2009 O2 UK revealed that talks between it and Vodafone for a network sharing venture were at an advanced stage. Subsequently, in October that year reports emerged that Cornerstone, the company managing the duo’s shared network infrastructure, was fully operational, at which date it was claimed that more than 100 cell sites were live or under construction. Little more was reported on the tie-up until March 2011, when it was rumoured that Cornerstone had put out a request for proposals (RFP) to vendors including Nokia Siemens Networks (NSN) and Ericsson, with suggestions that the move could be the start of preparations for a larger network sharing agreement between the duo in a similar vein to Mobile Broadband Network Ltd (MBNL), the 3G network sharing joint venture between T-Mobile UK and Hutchison 3G UK set up as far back as December 2007.

United Kingdom, O2 UK, Ofcom, Vodafone UK