High-speed mobile rollout sparks telco consolidation

Rapidly increasing demand for mobile communication capacity and the race towards 5G data speeds are putting increasing pressure on operators to invest in both infrastructure and spectrum. This, combined with falling revenues, means operators are being forced to look for ways to reduce, rationalise or consolidate the costs involved in rolling out high-speed mobile networks.

As a consequence, the sector has seen a significant uptake in M&A and joint project activity as companies seek to share the investment burden by granting access to either the newly acquired spectrum or newly rolled-out infrastructure.

A good example of this is Viatel’s recent sale of its non-Irish fibre network and enterprise business to Zayo Group, a global provider of bandwidth infrastructure and network-neutral colocation and connectivity services. This is one of the most significant networks ever constructed by an alternative operator and the deal provides strong evidence of the consolidation of infrastructure networks in the industry.

CMS advised Viatel on this transaction. Due to our detailed understanding of multijurisdictional telecommunication networks, we negotiated and concluded the transaction in a period of nine days.

Nonetheless, European regulators still seem strongly opposed to consolidation of mobile operators below a certain number of players as they fear this could lead to higher costs for consumers. It is therefore not surprising to find infrastructure and spectrum/access sharing deals are also on the rise. There will be tension between this tendency and economic demands of 5G and the Internet of Things.

The CMS Network Sharing Study gathered detailed information from CMS and ‘best friends’ lawyers across 22 countries, summarising the types of sharing deals, the networks affected, the network elements involved in the sharing and the types of vehicles or structures for coordination of the sharing. In addition, the study documented major deals and developments within these countries, and highlights regulatory specifics which have a major impact on these transactions.

CMS London partner Chris Watson, who heads the CMS Technology, Media & Communications (TMC) Group worldwide, said, “Spectrum sharing could provide significant financial savings and is almost a technical necessity for the effective use of certain frequency bands. However, we need far greater movement from the authorities to encourage cofinancing of infrastructure investment. This will be more challenging to achieve than the spectrum sharing solution because of the long-entrenched approach of favouring network-based competition.

Collectively, Europe needs to wake up to the threat it will face from other jurisdictions if it does not take a more joined up approach to encouraging investment in its high-speed mobile and wireless networks.

Chris Watson, Global Head of TMC

“Very few national authorities have expressed views on network sharing and that’s partly because, in some cases, they’re still debating whether it’s the role of the competition authority or the regulator. Collectively, Europe needs to wake up to the threat it will face from other jurisdictions if it does not take a more joined up approach to encouraging investment in its high-speed mobile and wireless networks.”

Through our Network Sharing Study we have been engaged to speak at events by the European Commission, the European Competitive Telecommunications Association, Deloitte, ALIX Technologies, Omantel, Oman Broadband Company and, most recently, in Iran in January 2016.

Chris Watson added, “Operators in Iran are very interested in sharing networks and this, combined with the rapid rise of new 5G technology, makes it an extremely innovative time for telecoms work in Tehran.”

All operators worldwide are now considering network sharing as an essential component of a balanced approach to the funding and structuring of the new networks and services.