Europe : The Financial Times reported on Friday, 14th September that Hutchison 3G and T-Mobile UK are currently negotiating a 3G network sharing agreement that will see the two operators merge their radio access networks (RAN). Both parties have confirmed to us that they are in discussion, but that there is no agreement in place to date.
There is no guarantee that the deal will go ahead at this stage. Both parties are cautious at this stage to set expectations or deadlines for this potential deal stating clearly that it will take time for the two companies to reach a final agreement. If a deal was signed, both companies insist that they would continue to operate independently, compete with each other in the UK, and manage traffic separately.
Comment: This is the second mobile network-sharing announcement in the UK this year. In February, Vodafone and Orange announced that they had agreed to share their 3G RAN (and potentially 2G RAN as well). In both cases, operators are looking at cutting capex. In the case of T-Mobile and 3, a deal would have further interesting consequences: Additional 3G coverage: T-mobile would benefit from the extended coverage that 3 can provide in the UK. It would enable T-Mobile to comfortably meet its 3G license obligation, which Ofcom will begin to assess from December 2007. Both operators have also rolled-out HSDPA and an agreement would enable the two operators to extend HSDPA coverage in a more effective way, by avoiding the duplication of sites.
The reduced 'environmental cost' from deploying fewer sites is likely to be popular. Spectrum re-farming: 3 may be able to use T-mobile's 900 MHz spectrum. 3 has been looking at UMTS 900MHz recently as a way to reduce the cost of running its network. Paving the way to an acquisition: This deal could be part of a broader strategic move by T-Mobile to acquire 3 UK. Some dismiss this possibility by stating that a network sharing deal would in fact increase 3's price tag. This is true, but a deal would also enable T-Mobile to evaluate 3 as a business before buying - which comes at a price. 3 is not officially for sale but there are signs suggesting that Hutchison 3G is currently working towards a divestment. It is busy buying retail space, which will increase its assets. Similarly, 3 is expected to target prepaid users, which could enable the operator to increase its EBITDA in the short term. However, all of the above could also be part of a new strategy intended to reposition 3 as a mature operation, instead of a new entrant.
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