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3G mobile operators may be jeopardising long-term profits by rushing too fast into network sharing agreementsdate: November 20, 2001 Cash-strapped 3G mobile operators are endangering their long-term success by rushing into ill thought-out network sharing agreements, Thomas Strohmaier, of global consulting firm Arthur D. Little, today warned. Speaking at the Mobile Infrastructure Sharing Conference, in London, he advised that uneasiness over debt burdens and pressure from investors are forcing operators into making decisions on network sharing without considering the strategy behind them. "There is no doubt that sharing networks will reduce operators' costs at a time when their return on investment is under scrutiny. However there are many different network sharing strategies that operators must consider and evaluate before making a choice", Strohmaier commented. Site sharing, RAN (Radio Access Network) sharing, gateway core sharing, fully shared or MVNO models, NetCo-ServeCo models (where a network company supplies one or more companies who only act as customer interface), geographic sharing, are all models currently being considered by European operators. Arthur D. Little advises operators considering a sharing strategy (or combination of strategies) to take a step backwards and analyse their overall business strategy asking: Which service generations will be offered - 3G only, 3G and 2G, 2.5G? Should I take MVNOs on my network? Who are my target customers and what is their performance requirement for 3G? The optimum 3G-rollout strategy will utilise bits and pieces from all generic sharing strategies stated above and combine them into a least cost highest performance solution. Advertisement: Explore Within This Space Some of these strategies like site-sharing or partially geographic sharing are most appropriate for incumbent operators who already provide a 2G or 2.5G service. Greenfield operators with no experience in mobile operations are most at risk of making the wrong choice while trying to earn back their licence investment. 'They need to assess which elements of the network it is feasible to share on the long run' says Strohmaier. 'It is tempting to implement complicated frameworks of sharing arrangements but while this reduces capital expenditures at the outset, it will mean that the operators more and more lose control of their network, making future changes harder to implement. This could lead to higher long-term expenditure thus endangering the operators' business performance, and ultimately financing plan.' Equipment manufacturers often state huge reductions in capital and operating expenditure for operators willing to share larger parts of their networks. Strohmaier warns that these figures should be scrutinised. Arthur D. Little's view is that many of these evaluations do not hold against a long-run TCO (total cost of ownership) evaluation as the calculation of future operating expenditures in shared networks is extremely difficult due to the difficulty to predict operational requirements for 3G networks. To avoid negative TCO effects in the future, mobile operators should take the time and effort for a detailed analysis of their sharing environment and potential future effects of different sharing and outsourcing scenarios.
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