Orange and Vodafone to merge networks

[3g-g]

Read on...

http://www.forbes.com/business/feeds...fx3406814.html

[Ben]

Vodafone and France Telecom's Orange are planning to merge their UK mobile phone networks in a deal designed to cut costs and bring new 3G services to a greater proportion of their combined 32 mln UK customers, the Guardian reported.

The deal, which could be announced within days, is understood to be focused on the two companies' 3G networks, but in future could extend to sharing of their older networks where coverage in remote areas is patchy, the newspaper added without naming sources.

[Ben]

No offence intended, Orange chaps and chapesses... but I'm not sure I want Vodafone's 3G network to have anything to do with Orange's given my past experienes!

Still, the coverage potential is droolsome.

[3GScottishUser]

This makes a lot of sense for both operators but it remains to be seen if Ofcom will warm to it. It's not the first time two networks have arranged to share network resourses as Vodafone and 02 already have combined services in many remote areas of the Scottish Highlands where duplication would have been simply unviable.

The combination of Orange and Vodafone's 3G capacity and coverage would make a very strong compeditior for the others and if allowed may be the catalyst for one of the others to acquire and integrate 3's network to speed up coverage and improve capacity.

Maybe the above has been designed to bring about such a move and force others to consolodate ruling out the arrival of any new UK player. I suspect there is more than one reason for this new development and maintaining control between 4 big International companies probably has a lot do do with it.

[Ben]

I wonder if the regulator will body-block this move with a big, fat no?

Potentially I think the deal could be allowed to go ahead provided both networks meet their own 80% population coverage requirement in the specified time. It might not take too much convincing, given the current climate for 3G usage and the returns on it for operators, for the regulator to allow that remaining 20% of coverage to consist of sharing.

Edit: The Reg is now weighing in http://www.theregister.co.uk/2007/02...afone_network/

[Hands0n]

The new company could be a Network Rail of the airwaves? Perish the thought. It all looks good on paper, and the financial department will love it. But what of the much maligned Customer? What, if anything, is in it for us?

Better coverage? *laughs down sleeve*

[miffed]

They should team up with NEC too

Lets see Just how many crap (formerly good ) things we can get in one place at the same time ?

[3g-g]

"Apparently" it's been to a few of the regulatory bodies where either no comment has been made or it's been approved, there are a few still to go, OFT and such. To the customer I don't think you'll really see much of a difference, perhaps greater coverage in certain areas, if you're Vodafone you'll still be on them, if you're Orange you'll still be on them. The idea being, that there'll be faster roll-out and potentially less masts, Node Bs just now allow you to set two operating frequencies, so one for O and one for V, the handset still sees two differing networks, however transmitting from the one mast. So where ever V bang a 3G mast up there'll instantly be Orange coverage and vice-versa. The potential is, if it's allowed, a roaming agreement could arise allowing each other on to the others 3G network, potentially doubling the capacity of each others offering!

[solo12002]

mm sorry guys but for some reason this reminds me of the story about Three being sold.

Is to day the 1st of April?

[Hands0n]

Originally Posted by solo12002

Is to day the 1st of April?

Everyday is 1st of April in Cool Britannia

I do think that this is a fairly natural evolutionary thing to happen if we are ever to get near-100% geographic (as opposed to population) coverage. I really do feel that it is appalling how we lose signal in a tunnel, by a cutting, over a hill, down a dip . Completely unnecessary, and more down to economising with the infrastructure than any real practical or physical problem. If the Hong Kong Chinese can have 5-bars of GSM signal in the depths of their underground tunnels (not stations, but all the way through) then I'm sure that it is not beyond technology to cover this green and pleasant land

[3GScottishUser]

Hmmmm...

I'm certain this makes lots of sense for both Vodafone and Orange but playing 'devil's advocate' it's more to do with consolodation and the removal of a lame duck with lots of 3G bandwidth before it's offloaded to some other company with 'new money' to challenge the market.

What Vodafone and Orange are doing will put huge pressure on others to replicate in order to reduce costs and there are benefits for all the big 4 if that pressure succeeds!

Brilliant strategy....

[3g-g]

Originally Posted by solo12002

mm sorry guys but for some reason this reminds me of the story about Three being sold.

Well if it is, all those conference calls I sat in on today were a waste of time!

[solo12002]

MM now I have to ask in light of Three using the Orange network for roaming would it not of been better if Three and Orange went down that route??

[Hands0n]

I have an inspirational thought - Orange and Vodafone team up and share networks. They "outsource" to an independent company in a similar manner to the rail companies using Network Rail for the actual tracks. Then, in a few months time, this independent company buy 3 for its network and assimilate it into a national 3G carrier network used by Vodafone and Orange.

Don't forget that you read it here

[Ben]

I'm loving the theories

What about jobs? Surely if this is a cost-cutting measure then it means jobs will be lost on both sides of the isle.

[3GScottishUser]

This will drive costs down thanks to the savings on sites and a single network infrastructure.

The move is strategic.

It piles pressure on other operators who will have to respond and make similar cost savings to remain competitive.

Vodafone and France Telecom have created an alliance that will speed up consolodation.

I am convinced that the UK will have 5 networks but only 4 operators shortly.

02 and T-Mobile could do a similar deal of course but neither would benefit from increased coverage. They would make savings though and costs could mirror those of Voda/Orange allowing them to reamin competitive. Or either could buy 3 and make similar savings.

The one thing that is clear is that the cost of operation per customer has to be reduced if the Voda/Orange deal is approved. T-Mobile and 02 will have to make a move and the notion that H3G UK can compete as an independent in the longer term is now more unlikely than ever.

Voda/Orange 32 Million
T-Mobile/Virgin 16 Million
02/MVNO's 17 Million
3UK 3.5 Million

The simple aritmetic re cost per customer to provide the service suggests that the screws are now being turned and the fallout if the deal is approved will be significant especially with 3G terminination charges set to be regulated and reduced.

[3g-g]

Originally Posted by solo12002

MM now I have to ask in light of Three using the Orange network for roaming would it not of been better if Three and Orange went down that route??

I think in terms of network size, coverage, brand and other factors the Orange/Vodafone model fits. They both have very similar objectives from this exercise, hence the reason they've "hooked up". They're the two biggest in Europe and if I was FT and wanted to get into bed with a pretty girl, I'd be picking Vodafone too!

[3g-g]

Ach, just some more stuff about this, i'm so surprised how little is being made of it! Interesting point in bold...

Currently Vodafone have a bigger network than Orange, so Orange would gain more than Vodafone from the deal, but in future it means that new cell sites will be used by both operators.

The agreement could have covered 2G (GSM) too, but as Vodafone use 900MHz systems and Orange use different systems operating in the 1800MHz band, it just not possible. That said, it’s likely future technology would allow both sets of frequencies to operate within the same radio equipment.

There will still be interesting problems to sort out for 3G sharing, as Vodafone exclusively use equipment from Ericsson (edit: and Nortel in the north, whom Alcatel own), while Orange use equipment from Nortel, Siemens, Nokia and Alcatel.

Once the network is in place, each network will be responsible for enabling their own network services and ensuring quality of service, etc. As competition for customers increases this is a sensible way for operators to reduce cost, share the infrastructure and compete on service. It’s a shame the fixed networks don’t take this view, as has been pointed out before, the LLU operators could join forces and build a joint LLU network and then compete on service. This might give them a larger network, which would be of a size and scale to compete with BT’s upcoming 21CN.

Why the rush to build?

With a 3G license comes obligations and one of these was to reach 80% of the population by the 1st Dec, 2007. Though the GSM network coverage hit that a while ago, 3G expansion has been slower with few customers really wanting 3G services so the operators have built 3G networks in densely populated areas where they can make revenue from those customers. That means big cities have been covered, but elsewhere 3G coverage is patchy to say the least.

Hutchinson 3G (or 3 the new entrant into the mobile world) has been rapidly building its customer base and building a network to match. In June 2004, Ofcom tried rules that 3 had SMP (significant market power) in the 3G world, which meant it would be regulated by Ofcom much in the same way BT is for fixed networks. The other 3G operators happily supported Ofcom in this view. 3 didn’t want the increased regulatory burden and disagreed with Ofcom’s ruling, so appealed to the Competition Appeal Tribunal. They won their appeal in November 2005. This was the first time any network has successfully appealed against a SMP designation.

3 wasn’t happy about having SMP forced upon it and therefore made noises to Ofcom about coverage obligations, which the other networks weren’t meeting. They’ve got 10 months to hit that 80% figure.

Though city centres might have a demand for 3G (for data services, no one cares about 3G voice - a voice call sounds the same whether it’s 3G or GSM), as you leave dense urban areas the appeal of 3G is less. Well maybe not less, but there are less people to use it and less of a reason for the networks to install 3G infrastructure and sites.

The cost of a 3G cell is probably not much different in terms of equipment from that of a 2G cell, one major difference is the amount of bandwidth needed for the cell, as data volumes are significantly higher (maybe 40Kb/s using GPRS data compared to maybe 2Mb/s for 3G, multiply that by 10 users and it’s 400Kb/s compared to 200Mb/s).

UK backhaul (i.e. the pipes used to connect cells) are expensive. The more rural the cell site is. the less chance there is that anyone (except maybe BT) has got any kind of high bandwidth connectivity. Therefore, the costs of the backhaul may well exceed that of the cell site itself.

Sharing makes economic sense
Orange and Vodafone have to hit that 80% figure or Ofcom can impose fines which could be significant. Therefore the build out of a shared new network makes economic sense. It’s half of what they’d each have to pay.

In this climate of everyone’s customers wanting everything for nothing, being able to reduce your build costs may well be the straw that doesn’t break the camel’s back.

http://digital-lifestyles.info/2007/...hare-examined/

[Hands0n]

I hear all the talk about the backhaul being expensive because BT have the near-exclusivity of landlines but .... what of microwave between cells.

I have seen this in place already where mini-microwave dishes link cell sites to a "concentration" site where, presumably, the landline backhaul takes the resulting data/voice into the network proper. Why cannot this be extended or used more to reduce the reliance on a meshed network of landlines - particularly where line of sight between transmitters is apparent.

Considering other points in the article; isn't 3G ever going to replace 2G entirely? Or do the networks really want to run parallel technologies? If the former is the case, then what is the problem? Why continue such heavy marketing of 2G handsets if they want to get folk over onto the 3G networks? Why, for instance, are the networks not selling only 3G handsets (all of which are backwards compatible with 2G). Why go to the expense of maintaining two sets of handset technologies? Why not take that particular element of choice away from the Customer? It wouldn't hurt any.

I do rather like the notion of a "Network Rail" of the airwaves - a nationwide network provider who delivers network services to the mobile network operators. Perhaps then we could truly realise 100% geographic coverage of the UK, and why not indeed?

[Ben]

Orange and Vodafone have to hit that 80% figure or Ofcom can impose fines which could be significant. Therefore the build out of a shared new network makes economic sense. It’s half of what they’d each have to pay.

Eh? Aren't Orange already well over that? Vodafone probably have 80% by now. I think this is far more to do with saving money than anything to do with OFCOM!