New 50/50 joint venture company established to manage shared physical infrastructure
Vodafone and Three are set to share their network infrastructure in Ireland to reduce costs and increase coverage for both operators.
Vodafone Ireland and Three Ireland have announced a strategic partnership agreement creating a 50/50 joint venture company to share their physical network and site infrastructure at around 2,000 locations across the country. Vodafone announced a similar deal in June with Telefonica UK to pool their basic network infrastructure to create one national grid in a joint venture company for mobile services including 4G.
Both companies will continue to run the intelligent elements of their networks separately, including their core network capabilities and service platforms, as well as manage their own radio equipment and spectrum independently.
The strategic partnership, which is the first of its kind in Ireland, will see the joint venture business managing the rapid roll out of a consolidated portfolio of shared network sites and infrastructure. The joint venture will also be responsible for maintenance, on-going operational service and associated equipment of the network.
Through the partnership, Vodafone Ireland and Three Ireland will be able to purchase network infrastructure equipment together to reduce costs, increase the number of sites connected to a fibre backhaul network, and have the opportunity to expand mobile network coverage for customers.
Francesco Radicati, research analyst at Informa Telecoms & Media, commented that the deal symbolised cost savings for Vodafone, but a grab for survival for Three: 'Network sharing agreements are becoming more common, as the cost of carrying mobile traffic increases and mobile network operators have to fight harder for profit. Three in particular has been very active in making these deals, for example in the UK, where it has a network sharing agreement with Everything Everywhere. We expect this trend to accelerate, as operators seek to cut costs by reducing infrastructure and CAPEX where possible.
'This need is particularly pressing in Ireland, as the recession is putting pressure on operators' revenues, with Vodafone seeing a year on year service revenue decline of nearly 1% this year, while retail revenues fell by 2.5% overall during the same period,' continued Radicati.
'For Three, by contrast, these deals are more a matter of survival, as the company finds it harder and harder to compete from the position of a challenger; one example is Three UK's joint venture with Everything Everywhere, MBNL. Meanwhile in Austria, Three has successfully bid for rival operator Orange, giving it a boost in terms of subscribers, revenues and infrastructure to allow it to stay in the market. In essence, for Vodafone, as the largest player in the Irish market, this deal presents a cost saving opportunity; for Three it's an opportunity for survival.'
Under the agreement, duplicate sites will be decommissioned, and each company will have access to the other's sites. Both companies will continue to remain independently responsible for what technology and spectrum is deployed on a site-by-site basis and what standard of service customers' experience. Each operator retains the flexibility to invest in dedicated sites and equally to choose the pace and degree of new technology deployment according to the level of service each company plans to deliver.
Jeroen Hoencamp, CEO of Vodafone Ireland, said: 'Securing future investment for technologies in a competitive market is critical to maintaining a sustainable business. We believe this partnership will place both companies in a stronger position to commit to future investment in our network, and the products and services we provide to customers.
'This agreement, in which infrastructure is shared between both parties, means we can concentrate investment on the intelligent part of the network that will ultimately deliver a better experience for Vodafone customers. At a retail level, we will continue to compete with each other and with other operators as aggressively as before as part of our commitment to deliver great value and innovative services to consumers and businesses across the country.'
Robert Finnegan, CEO of Three Ireland, commented: 'Around the world, operators are adopting a network sharing and consolidation strategy that delivers cost efficiencies and rapid network expansion with the roll-out of new technologies such as LTE, whilst still competing fiercely on customer service and acquisition. Today's announcement is significant for Irish consumer; jointly we're creating the largest physical network in Ireland with the best network quality and service. As a result of this agreement we expect to be able to deliver the latest technologies to our customers faster than ever before. This new joint venture combines the best of both networks and will be the smart choice for the savvy mobile customer.'
The new company is expected to be fully operational from the Autumn and will be headquartered in Dublin. The managing director will be appointed from an independent pool of talent and the new company will have its own management board. Approximately 80 employees will transfer from Vodafone Ireland and Three Ireland to the new joint venture company after a consultation period. These will include employees that currently work in the radio and transmission teams, the network operations centre, and some support roles.