First it was infrastructure sharing in markets as diverse as India and Indonesia where sensibility has outweighed competitive senselessness. The simple concept of sharing base station facilities and antenna masts will save operators millions of dollars per annum. Environmental issues, lower power costs, lower maintenance costs and less sites meaning less rental, are all shared positives that set an example for other markets. Greedy building landlords will also be kept in check as less on-building sites will be needed in the long run.
Addressing rising costs has been a big priority for every CSP over the past five years but the nature of the telecoms industry and the intense competition it generates has often been a barrier to other cooperative efforts. Attempts to set up payments models, joint content stores and even app stores such as the WAC have often been protracted or simply ended in abject failure.
Even the impact of mobile alliances created years ago appears to have fizzled, except maybe those with common stakeholders. The promise of static roaming charges across multiple markets, shared service delivery platforms and content portals would have meant greater cost-sharing and potentially happier customers. Yet most consumers today have no idea what alliance their CSP belongs to, let alone what benefits it brings them. This is almost the exact opposite of the airline industry where alliances have been much more successful in generating loyalty and lowering costs through shared reservation systems, airport infrastructure and terminal slots.
One of the earliest and strongest reasons for the establishment of mobile alliances was supposedly the combined purchasing power the alliance could bring its members. Of course, this assumed that they would all be purchasing network infrastructure, business systems and even handsets from the same suppliers. But this is no perfect world, and it soon became apparent that alliance members could agree on very little, let alone sharing plans for growth and purchasing.
This makes the latest news via Dow Jones, that France Telecom and Deutsche Telekom AG are forming a joint venture to buy telecom and network equipment aiming to save EUR1.3 billion in costs per year, most fascinating.
The report states that the two companies will combine their procurement activities for customer and network equipment such as mobile phones, as well as service platforms and some IT infrastructure.
The 50-50 joint venture, builds on earlier cooperation agreements between the two companies, notably on technology, and the need to keep increasing network capacity and speed to cope with the massive growth in mobile data traffic.
Revenues are also under pressure from regulation and increased competition in their mature home markets, and both parties hope the closer cooperation will give them a competitive edge over rivals as savings will be reinvested into networks.
The move isn’t a total surprise as France Telecom and Deutsche Telekom said in February they were exploring potential areas of cooperation, including network sharing. In the UK they have already combined their mobile activities in a joint venture called Everything Everywhere that is expected to generate synergies of EUR4 billion.
Let’s wait and see if these two European powerhouses can succeed and set an example for other markets, but not everyone will be happy. Vendors of equipment and systems may now find it even harder to win deals that are profitable. How low can they go? There will also be the added complication of having two task masters to keep happy. Should be some interesting times ahead.