In a price-sensitive market characterised by rapidly growing demand for telecoms services, SA's mobile operators would do well to take a leaf out of fellow emerging markets' books and set aside their differences and pool resources to the end of better quality and lower prices for local consumers.
This is according to analysts and comes on the back of fellow emerging markets' moves to share telecoms infrastructure and work together on new-generation networks.
Analysts say although SA's operators are battling to an extent with the concept of sharing passive infrastructure like towers, the notion is being considered by government. According to Africa Analysis analyst Dobek Pater, there are telecoms operators looking to get involved with combined, open access infrastructure as well.
Newcomer to the local consumer telecoms market Orange has also advocated shared infrastructure as a means of increasing competition and quality, while lowering costs. Orange Horizons MD S'ebastien Crozier told ITWeb last week that the operator would be interested in being hosted by infrastructure shared by two or three local players. This kind of setup, he says, would allow Orange to become a fully-fledged mobile virtual network operator in SA.
Israeli agreement
This week, major mobile operators from both Israel and India announced plans to cooperate and share infrastructure, as well as set up new-generation networks together.
According to Reuters, Cellcom - Israel's largest mobile phone operator - said on Tuesday it had agreed to share the expense of setting up a new fourth-generation (4G) network with rivals Pelephone and Golan Telecom.
The deal entails cooperation to acquire 4G frequencies by the three operators, while the network will be built and operated by a newly-created entity - equally owned by Cellcom and Pelephone.
"Each operator will be required to purchase and operate its own core network and costs will be divided equally among the three operators, subject to certain conditions and limitations set in the agreement, which is for 15 years."
Cellcom CEO Nir Sztern says Isralel's mobile market will face continued challenges in meeting the demand growth from mobile data in coming years - a picture industry observers have long painted when it comes to SA's mobile landscape.
Sztern says the network sharing agreement will help reduce the number of base stations - and the resulting reduction in cost will help maintain competition, ultimately benefitting Israel's consumers.
Cellcom said the sharing agreements would probably also result in substantial operating and capital expense savings.
Indian alliance
A day after the Israeli agreement was announced, India's top mobile operator Bharti Airtel and Reliance Jio Infocomm revealed plans for a telecoms infrastructure sharing arrangement, which will see the two sharing infrastructure created by both of them.
Reuters says the companies, headed by long-time rival billionaires Sunil Mittal and Mukesh Ambani, respectively, undercut each other during Reliance's last foray into telecoms nearly a decade ago. "Now they will work together as they move into data-driven telecommunication services."
The news service quotes Ambit Capital analyst Ankur Rudra: "With two prominent rivals cooperating and with infrastructure being shared, there should be cost savings." This is an outcome local analysts say a similar deal would have in SA.
Bharti and Reliance said in a joint statement this week that their agreement involved sharing inter- and intra-city optic fibre networks, submarine cable networks, communications towers and Internet broadband services - and that it may extend to other areas of telecoms.
"The cooperation is aimed at avoiding duplication of infrastructure, wherever possible, and to preserve prevailing market rates," the companies said.
Local loop
Pater notes that an active structure like Israel's three operators' sharing of radio infrastructure is one of the options being considered by SA's government. "We do not yet know what the final decision will be in terms of LTE spectrum allocation or use thereof."
He says there are at least two local operators - which he cannot presently name - that have considered building a national LTE network of their own, but on an open access basis. "[In this scenario] any licensed service provider would be able to lease capacity on that network to provide mobile broadband services."
However, he says, these plans have not progressed much as neither of the operators have the kind of money needed to throw at a project of this nature.
He says if two or more existing operators decided to form a joint venture to build a common active LTE network, the Independent Communications Authority of SA (ICASA) would most likely support the move. "It would be an innovative way of cutting capex and opex, and would probably drive competition on the basis of service quality and price, as all operators in the joint venture would have access to the same underlying infrastructure."
However, on the issue of sharing passive infrastructure - which is becoming popular worldwide -Pater says SA's operators are battling with the concept. "The concept of sharing an active mobile network is still quite foreign, as operators consider this to be one of their strategic advantages, especially when it comes to LTE.
"For example, Vodacom and MTN have the resources to deploy LTE much quicker and wider than Cell C or Neotel."
SA's leading mobile operator Vodacom believes infrastructure competition is an essential ingredient in stimulating development and innovation.
"It's unlikely SA would have seen the rollout of LTE services as rapidly as it did were it not for the competition between networks to provide the best service," says Vodacom spokesperson Richard Boorman.
"Network quality is a key differentiator and the consumer, therefore, is the ultimate beneficiary as each operator ramps up investment in order to remain competitive."
Pater says sharing of active mobile infrastructure has been introduced by some operators in the UK and now in Israel as a concept, but SA might be hesitant to follow suit just yet. "I think SA operators would not want to be on the bleeding-edge of experimenting with sharing of active infrastructure and would rather look for other ways of reducing their costs, while the technical aspects are ironed out."
World Wide Worx MD Arthur Goldstuck says not only could an agreement similar to other cooperating operators work in SA, it would be a step towards a far better approach to spectrum allocation, "namely the creating of a spectrum pool, from which all operators could draw as needed".
Pros and cons
The upside of network sharing, says Goldstuck, is that shared costs would mean reduced costs for operators - while for the consumer, it would mean accelerated deployment of high-speed access and more rapid reductions in price.
On the downside, however, he says it would mean all operators would be on a relatively similar playing field. "[So] those with the muscle to differentiate themselves through infrastructure would see that differentiation reduced."
A disadvantage of network sharing for consumers, he says, is that it would probably reduce the range of choices available.
Pater says the main benefit of network sharing for the operators is reduction of capex and opex. "It allows operators to divert funds toward other aspects of service provision and become more competitive on price, possibly more profitable.
"With pooled resources, operators should also be able to build a more extensive network in terms of geographic and population coverage. The overall quality of the active network (quality of services) should be better as a greater frequency block could be allocated to a single network."
For consumers, he says, it would probably mean better quality of service at a lower price. "Since all operators using the same network would have access to the same infrastructure, it would no longer present a competitive differentiator. Instead, they would need to become more competitive on the overall quality of service provision, more innovative in how they sell products and services, and probably also probably offer lower tariffs."
On the disadvantages Pater reckons there would not be any for consumers, as long as the network is properly maintained and capacity not oversold.
However, for large operators that have the resources to deploy their own extensive networks, the downside would be loss of infrastructure as a competitive differentiator in the market, especially outside of the main metro areas.
"In networks that are open access there could be potentially a problem associated with 'overselling' of capacity - that is, allowing many service providers to buy capacity to provide services to the point where certain sites become congested."
In the document outlining SA's new broadband policy - gazetted last Friday - communications minister Yunus Carrim says he will "consider the viability and competitive impact of the introduction of open access wholesale fibre and wireless broadband networks".
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