Professional Documents
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Transform or Perish
Dr. Kim Kyllesbech Larsen, Technology Leadership Forum, June 14 th 2012, Bonn.
Initial discussion with Orange NL started in mid-2001. JV operational from mid 2002 to 2004.
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JV closed down in YE 2004. 2007: Joint 1.3B or ca. 600 per customer. #Base Stations ca. 2,300 (at time of breakup). Price of Orange NL was ca.venture design, plan & build-co MBNL Ltd.
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TMUK Population ca. 40+M (TMUS TMNL decides no need for ancillary sharing. nodes and - Ca. 5,000 fewer radio adds 3,000 5,000 3G Node-Bs that would otherwise not have been had 1.7M subs @ breakup in CA/NV)
Common 3G plan & build organization (MBNL Ltd). Oct 2007 T-Mobile acquire Orange; network consolidation started. Venture discontinued in 2004 with Cingular AT&T Wireless merger. Securing future competitive growth. Positive TMUK T-Mobiles radio network run-rate avoidance). with 30%-40% denser + add spectrum optionality. EBITDA net of 50m 14% network by (net) $2.3B for California/Nevada grid than standalone. (ca. single TMUS pays 2014ish Nov 2008 all Orange customers were migrated to leveraging on higher spectral efficiency by consolidating. - Starting point a network of 14,000 sites,NYC Metroend-game is 18,500. TMUS forced to spin-off 10MHz in today the markets (very painful!).
#Base Stations ca. 5,000 (at The breakup). 2009: EE Network (ad)Venture time ofBIGGEST Network in UK!
On track to deliverPositive annual Capexof 1+B by79m Total 9,000money). roaming agreement. synergies in excess benefit of 2013 by 2012 (18% run-rate avoidance). (in time & site locations will be terminated (33% reduction) Nationwide
Kim Kyllesbech Larsen, Technology Economics Deutsche Telecom 13 H3G capital benefits far in excess of 0.5B (estimated savingspectral efficiency by consolidation. Leveraging higher & avoidance).
Substantial
site lease cost savings andLargeprevention expected. synergies in both Network & IT. cash and readily achievable
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Opex run-rate synergies ca. 35% (on relevant cost!) Capex run-rate synergies up-to 25%.
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Integration & termination cost of up-to 1.2 bn. Kim Kyllesbech Larsen, Technology Economics Deutsche Telecom 16 EE has the BIGGEST mobile network(s) in UK which will remain so even after consolidation and integration has been finalized.
Kim Kyllesbech Larsen, Technology Economics Deutsche Telecom
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Initial discussion with Orange NL started in mid-2001. JV operational from mid 2002 to 2004.
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Site & ancillary sharing. Common plan & build organization. No common procurement.
Staff resistance (them vs us) Different strategic objectives. TMNL decides no need for ancillary sharing. More economical to share own infrastructure than common.
Oct 2007 T-Mobile acquire Orange; network consolidation started. Nov 2008 all Orange customers were migrated to T-Mobiles radio network
Ca. 5,000 fewer radio nodes and Ca.3,300 (ca. 50%) fewer site locations.
Securing future competitive growth. leveraging on higher spectral efficiency by consolidating. On track to deliver synergies in excess of 1+B by 2013 (in time & money).
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Geographical GSM RAN sharing agreement. T-Mobile US (via JV) responsible for NYC Metro areas.
Population ca. 22+M #Base Stations ca. 2,300 (at time of breakup).
Population ca. 40+M (TMUS had 1.7M subs @ breakup in CA/NV) #Base Stations ca. 5,000 (at time of breakup).
TMUS pays (net) $2.3B for California/Nevada + add spectrum optionality. TMUS forced to spin-off 10MHz in NYC Metro markets (very painful!). Nationwide roaming agreement.
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3,000 5,000 3G Node-Bs that would otherwise not have been financially/economical feasible. & build organization (MBNL Ltd).
TMUK EBITDA net of 50m (ca. 4% run-rate avoidance). annual Capex benefit of 79m by 2012 (18% run-rate avoidance). site lease cost savings and cash prevention expected.
Positive
H3G capital benefits far in excess of 0.5B (estimated saving & avoidance).
Substantial
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Total 9,000 site locations will be terminated (33% reduction) Leveraging higher spectral efficiency by consolidation. Large and readily achievable synergies in both Network & IT.
Opex run-rate synergies ca. 35% (on relevant cost!) Capex run-rate synergies up-to 25%.
Integration & termination cost of up-to 1.2 bn. EE has the BIGGEST mobile network(s) in UK which will remain so even after consolidation and integration has been finalized.
Kim Kyllesbech Larsen, Technology Economics Deutsche Telecom
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Rural Area / Geographical sharing. National roaming like sharing concept with joint field services. Rural areas with population of less than 25,000 pops. Ca. 1,500 Node-Bs where shared by YE2007 with max 5,000 by YE2009. Venture frozen in 2009 as VF announced sharing deal with Telefonica.
Passive RAN network site sharing. Traffic managed independently of each other. Customers expected to benefit from improved coverage. Benefits in the order of hundreds of million for both over next 10 years. Today (May 2012) they share 4,000 site locations.
(i.e., VF-Europe Opex in 2008 was 16.4 bn and TF-Europe 2008 Opex was in the order of 13 bn).
Kim Kyllesbech Larsen, Technology - T-Mobile. 19
Common Build JV, planning & design separately. 1 single network by 2015 with doubling the site count to standalone.
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Each has ca. 10,300 sites today with shared end-game of 18,500.
Total of ca. 2,000+ site locations will be terminated (10% reduction). Geographical (50%-50%) sharing (i.e., London halved). No Frequency sharing. Individual supplier relationships (missing out on procurement scale?). Massive Opex and Capex avoidance. This is NOT an Opex reduction game but rather matching EE super-grid.
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Dominated by Nextel
Matching technology landscape and strategic outlook. Good complementary spectrum (high grid match). Fairly symmetric & matching business structures and models.
Mismatch in technology landscape & strategic outlook. Complementary spectrum but relative low grid match. Very different business structures and models.
Termination cost 1.5 3+ of Opex savings Integration Capex synergetic with BaU Capex Instant Cell split potential Enhanced Capacity Spectral efficiency gains (>10%+)
Illustration
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LTE
UMTS
UMTS - GSM
Rollout Phase
UK: 3G T-Mobile 3 UK
Steady State
UK. T-Mobile UK Orange JV (EE Ltd).
Modernization
Poland: PTC Orange incl. LTE
Illustration Passive sharing: Site Lease & Civil Works, Mast/Tower sharing, Ancillary & Rack sharing, and Backhaul Sharing. Active sharing: e.g., Frequencies, TRXs, PAs, Baseband, CPU, ports, .
High Capex prevention. Opex prevention. Cash optimized startup. Best network.
Little Capex benefits. Opex savings. Significant write-off. High re-structuring cost. Extended coverage.
High Capex prevention. Opex savings. Minor write-off. Re-structuring cost. Instant cell split. Better network.
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OPEX Synergy
Restructure Cost
Restructuring cost can be low if little legacy infrastructure is present.
Write-off
Relative low exposure if little legacy infrastructure is present.
Rollout Phase
Bulk (>80%) of sites and nodes to be deployed.
Opex prevention Site lease Non-telco services Telco services Energy Resources
Steady State
80% of coverage and sites deployed. Mainly capacity additions and coverage maintenance.
Passive sharing
Opex saving if absolute number of site locations are reduced. Primarily Opex prevention in case of site number expansion. Opex saving if absolute number of site locations are reduced. Primarily Opex prevention in case of site number expansion.
= Low = Low
Termination Site lease. Site restoration. Service Contracts. Personnel cost Other JV overhead Legal, etc.. Restructure cost can be significant. Although contract termination can be less costly due to longer operational period.
= High = High
As most of the network has been deployed at this stage the write-off exposure can be significant even if equipment can be re-used. If decision for network sharing is taken in the renewal / obsolescence phase write-off exposure can be relative light both for equipment and site-build.
Modernization/ Obsolescence
Active element / node replacement, technology migration. Site consolidation.
Passive sharing
Substantial Capex
Illustration
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Urban
Sub-urban
0%
20%
40%
60%
80%
100%
0% 50% 100%
Sites
Dr. Kim Kyllesbech Larsen, Technology Economics Deutsche Telecom 13
Site
(acq. + build)
Radio
(electronics)
Backhaul
(transport)
Backbone
(transport)
Core
(switch & control)
BSS
(bill & care)
plmn 1 plmn 2
MNO 1 Core
plmn 1 + plmn 2 (optional)
BTS & NODE-B eNodeB
BSS
MNO 2 Core
BSS
Capex prevention
Efficiency enabler
40%-60%
< 35%
up-to 50%
up-to 50%
Partly possible
Less likely
Opex prevention
Regulatory complexity
Efficiency enabler
HIGH
scale discount
LOWER
scale discount
LOWER
Partly possible
HIGH
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Sharing: Costly Radio Access Network infrastructure will be shared, Not shared: All core network and service infrastructures that provides respective customers with differentiated services, applications, handsets, rate plans, etc. Result: A network with greater capacity (i.e., instant cell split) and improved coverage.
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Network sharing.
A mean to close the mobile broadband coverage gap (in CEE).
Network Sharing Strategies
Rural areas1
BILL PRICE BRAND SALES Operator A SHARED Operator B
BILL
PRICE
BRAND
SALES
Urban areas1
BILL PRICE BRAND SALES
Idealized Illustration
BILL PRICE BRAND SALES
SERVICES CORE
Benefits.
Opex avoidance & savings. Substantial Capex avoidance. Shared Modernization. Shared LTE deployment. A Much better network.
Note sharing spectrum between two (or more) MNOs might not be regulatory allowed, 2 RAN JV Co can (often will) have different role & responsibilities.
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Core
Core
Core
Core
Core
Core
BSC RNC
BSC RNC
BSC RNC
BSC RNC
BSC RNC
Shared site and passives Independent BTS, NB, eNB. Passive sharing. shared transport (possible). Independent frequencies.
1 Multi-Operator
Shared Radio, aggregation & frequencies (optional). Active sharing (MOCN1) Shared transport. Frequencies sharing.
Wholesale arrangement, geographical partnership. Geographic sharing. One frequency sufficient. Wholesale/cost-sharing.,
Core Network supporting RAN Sharing, (*) For LTE there is no BSC/RNC, core networks connected directly to the eNode-B.
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3GPP Release 8, 2009 (earliest) onwards with the following sharing concepts:
Gateway Core Network (GWCN) shared core network (CN) (multiple CNs connected to a common core, connected to the shared RAN).
HLR
HLR
MOCN: Multi-Operator Core Network where only the RAN is shared (i.e., NO common CN). Introduction of Iu Flex allowing multiple CNs connecting to shared RAN.
Core
...
Core
Multiple core networks connected to a common radio access network (RAN) sharing a single frequency or a pool of frequencies. Service requirements & capabilities not limited by the sharing requirements (i.e., resides in core network or service creation platforms above the core network). Requires user equipment support (i.e., R8 or later). Non-supporting user equipment will ignore the broadcast system information related to sharing functionality. Fairly complex coordination issues on resource allocation among sharing parties, making this concept more interesting for low-traffic rural areas (where demand is no issue) or highly asymmetric traffic situations.
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1 operator share its spectrum with others. Multiple operators pool their spectrum assets together and share total spectrum.
MORAN = Multi-Operator Radio Access Network sharing of all active electronics with exception of frequencies. 2 MOCN = Multi-Operator Core Network = two core networks connected to 1 frequency. (*) For 3G network core networks connect to the RNC that then connects to the Node-B.
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VAS Network
IT & CS Network
Spectrum / Frequencies GSM BTS GSM BSC GSM TRX 3G Node-B 3G RNC 3G Carrier & Channel elements e-Node-B (LTE RAN) Backhaul (MW & LL) Routers, switches and multiplexing SW Licenses & features. NMS & operations. Etc.
Classical MSC/VLR R4 MSC Server & Gateway Multiplexing GGSN & SGSN (packet core). Evolved Packet Core. IP networks (routers, FW, etc..) Backbone transport Interconnect NMS & operations. Etc.
SMSC MMSC VMS WAP Portals 3rd party content NMS & operations Etc
Billing system Rating Mediation CRM SAP/Finance systems. Business Intelligence. Call center systems (call routing, ..) OSS IT Operations. Etc.
Complex Governance
Technology mismatch
Provides.
Attractive (startup) cost economics.
Enablers.
Profitability & cash crunch.
Incumbent spectrum crunch. MVNO / tier-2&3 MNO appetite.
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3rd parties (supplier) delivers core network functionality (i.e., HSS, PCRF, etc..)
Provides.
Data-only QoS transparent network.
Enablers.
Regulatory support.
Spare Spectrum (i.e., typical Startup). MNO & MVNO appetite.
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()
Typical 20% HC reduction Typically Capex commitment Good savings potential, though risk for future sharing optionality Opex Capex trade-off 10% - 20% HC reduction Opex Capex trade-offs Minimum 10% pa
()
Min. 20% - 35% >35% but depends on network reduction. >35% but depends on network reduction. More Opex Capex trade-off Minor opportunities <10% due to scale. Minor opportunities <10% due to scale. At least 35%
Ca. 5% - 10%
(can be a lot higher if majority leased transport)
Illustration
Note: Above numbers serve as illustrations only. Different operations may have different Technology Opex distributions..
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Key messages.
What we need to be passionate about!
First things first
Utilize technology to achieve the best operational performance RRH, SDR RAN, Single-RAN, FTTS, Virtualization, Cloud, dont over-focus on financial savings!
Network sharing provides cost reduction & increased quality. & increased complexity & upfront cash needs & dont forget!
Sharing models for mobile applies to fixed broadband as well. Maybe Even more so!
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Freedom
& Mobility