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Practical aspects of network sharing agreements

CMS has advised electronic communications operators and investors on network sharing agreements over many years.

Successful deals require:

  1. several months of planning,
  2. preparation of business cases,
  3. detailed operational studies, and
  4. thorough assessments of potential benefits and risks.

What are the potential deal stoppers to watch out for?

 

1. Regulatory aspects     

  • Identify potential regulatory barriers and the various government authorities that might have a say on a potential network sharing agreement.
  • When choosing the level of sharing (e.g., passive sharing, frequency sharing, active sharing, etc.), consider regulatory aspects and limitations - from both the telecom regulatory and competition law perspectives - as each local regulatory authority may have different views.
  • If possible, approach all relevant authorities and engage them in open communication throughout the process - even where this is not mandatory.

2. Technical and commercial constraints

  • Internal (financial and technical) assessment.
  • Before entering into negotiations with another operator, analyse the interoperability of the two parties’ networks.
  • Assess whether the interested parties have equipment with similar technologies, suitable or conflicting infrastructure locations, differing architectures or major investment requirements.

3. Antitrust risks

  • Make sure that negotiations and any implementation of a network sharing arrangement comply with competition law principles.
  • Possible anti-competitive outcomes which it can be argued may arise include: (i) joint dominance (ii) exclusion of competitors, and (iii) coordination of the parties’ market behaviour, etc.
  • To reduce risks, restrict access to potentially commercially sensitive information by incorporating a joint venture or using a third party to act as a “black box” to filter sensitive information.
    As setting up a joint venture could trigger the applicability of merger regulations, consider a strong “clean team” or ”Chinese walls” mechanism.
  • Try asking the local competition authority whether you could work together to develop a set of rules, especially if they have not issued any regulations or guidelines on the disclosure of information between competitors.

4. Other considerations

  • Depending on the specific structure of the network sharing arrangement, consider other aspects such as: (i) IP rights, (ii) real estate, (iii) data protection, (iv) employment, and (v) company law, etc.
  • While it is possible to manage many of these risks using internal legal teams, third party advisers may be helpful, especially if they have worked on similar deals with similar risks.

Authors

Claudia Nagy
Claudia Nagy
Senior Associate
Bucharest