I’m not not sure whether my consistent bleating about the telecoms industry needing to work together more, the threat of outside competition encroaching their space or from sheer economic necessity, but it seems co-opetition is actually starting to take hold.

News that Telefónica and Vodafone want to jointly operate and manage a single network grid in the UK, that will effectively run two competing mobile internet and voice networks, is not only heartening but incredibly sensible. How it will be achieved successfully may be a different matter altogether.

Nevertheless, it is a move in the right direction. The idea of sharing tower sites has been around for years, first mooted as a means of selling tower infrastructure to a third party and leasing back to convert capex to opex. Most recently, Malaysia’s Axiata Group is reportedly in talks with India’s Idea Cellular over a deal to create a SouthEast Asian telecom tower company. This would see a telecoms group setting up in direct competition with finance companies that have been most active in the space to date.

When you consider that Axiata owns 20 percent of Idea Cellular and has controlling stakes in mobile operators in Indonesia, Sri Lanka, Bangladesh and Cambodia, you can see the benefits of keeping those critical assets ‘in the family’. Sharing tower assets is one thing, but sharing a single network is a far more complex undertaking. The proposed Telefónica/Vodafone joint venture would presumably build on an existing arrangement established in 2009 that included the sharing of towers and masts.

Analysts estimate the combined savings that could be achieved from sharing the one network could reach in excess of €1 billion by 2015. After all, network expenditure is still one of, if not, the greatest capital expenditure items, but those very same analysts also think it may be easier said than done.

Setting up a joint venture company would seem simple enough and even getting approval from the UK regulator, Ofcom, should not be met with resistance, but transferring assets to the new entity might prove to be a much bigger challenge.

Assigning a fair value to the assets that each party contributes will certainly require a third-party ‘trusted partner’ for independent assessment. The assets’ ‘book value,’ dependent on what accounting standards are utilized in assessing depreciation, may not necessarily be their fair market value. Where there is replication of assets, such as close proximity of sites, a decision will have to be made on which to keep and how the costs of relocation and decommissioning should be shared.

Philip Bates from Analysys Mason also pointed out that in calculating further cost savings such as backhaul sharing, particularly relevant with Vodafone’s acquisition of C&WW’s UK fiber network, one party may be seen to gain more benefit than the other. Dispute management should, hopefully, be a key component of the JV as disputes will almost certainly arise.

The ‘pros’, however, certainly appear to outweigh the ‘cons’, especially when looking forward to future network investments such as 4G LTE rollouts. Of course, each company will retain control of its individual spectrum, intelligent core networks and customer data, but they will compete openly on all products and services each offers.

This is a logical progression for the industry as whole and it will be closely watched, no doubt, by other markets. It’s almost like seeing Telefónica and Vodafone becoming MVNOs of the new joint venture network operator, or is that simplifying matters a little too much? Our American colleagues, quick to define three- and four-letter acronyms for everything, may have to decide what to call such an entity. Would it be an ONTO (One Network, Two Operators) or a DOON (Dual Operators, One Network)? One also has to spare a thought for those network vendors who have most to lose from two networks becoming one, and having only one prospect instead of two when it comes to rolling out 4G.

First published at TM Forum as The Insider, 8 June 2012