Airtel, Idea and Vodafone close to network sharing deal

Fierce competition from new entrant Reliance Jio is pushing the incumbent telecom operators Bharti Airtel, Reliance Jio and Vodafone India to accelerate negotiations to allow them to use each other’s full networks.


As of now, these operators only share ‘passive’ or ‘dead’ infrastructure such as the physical tower and generator sets.

Active infrastructure — or equipment through which telecom signal flows — is not shared at present.

Sharing such equipment — which includes electronics, fiber, antenna and spectrum — will allow the three operators let their subscribers be served by a single network instead of maintaining three networks.

As such, instead of having three antennas on each tower, they can make do with one. Similarly, instead of having three fiber cables connecting their base stations, they need only one.

Another key saving will be in spectrum. Assuming that each operator is using 7 MHz of spectrum for 2G services in an area, they can pool their spectrum together into a single 10 or 12 MHz block that can be used by the subscribers of all three operators.

This will leave a surplus of 10 MHz that can be used for 4G services to the subscribers of all three operators.

Technically, a three-way sharing of network can reduce the cost of network operations — the single largest cost item for any telecom operator — by 66%, making these operators competitive against new entrants like Reliance Jio.

This kind of full or ‘active sharing’ was allowed by the department of telecom early last year, but operators were not very keen on sharing their network as coverage was considered a key product differentiator by them.

In other words, if all three operators used the same network, then none of them could claim to have a better coverage or speed.

COST SAVING

However, with the entry of Reliance Jio, two developments have taken place that have made sharing more viable: the market has shifted away from 2G voice services, and these companies have slipped into losses due to high expenses.

The emphasis is now on saving costs and building out their 4G networks.

Idea Cellular CEO Himanshu Kapania said he expects the active infrastructure sharing deal to be inked very soon.

“We are on the anvil of signing (an active infrastructure sharing agreement),” he said. “We are very hopeful we will be able to close that. A lot of work is going on (into it),” he said.

Although he did not say which operators will join the agreement, he said he was hopeful of three operators being party to it.

He compared it to the 3G intra-circle-roaming agreements entered by Vodafone, Bharti Airtel and Idea Cellular seven years ago that allowed these companies’ subscribers to use each other’s networks.

He said the 3G agreement was signed for a period of ten years, and companies have to scrutinize the clauses that make up such deals.

“These are for a long period. We have to be very careful about it,” he said, explaining the delay.

Kapania said he expects to be able to shut down some of his company’s towers this year as a result of the expected active infrastructure sharing agreement.

Idea has already shut 876 2G towers in the first three months of 2017, but these were shut because they were uneconomical despite being in operation for several years.

“We found certain tenancies have very low utilzations over 3-7 years. The business team was not very confident of getting returns out of these towers,” Kapania said, adding that more such exits are likely.

“We had the benefits of contracts (with tower providers) to exit 3% of our overall tenancies and we availed of that,” he said.

This year too, many towers would be shut down “either through full exits or through active infrastructure sharing,” he said. “It is a new trend.”

The shut downs would mean great savings for incumbents.At present, network and IT operations account for about a third of telecom companies’ operating expenses.

FASTER 4G ROLLOUT

Besides saving on operating expenses, full network sharing will also help the companies expand their 4G and fiber networks in two ways — by being able to generate money to build out 4G and potentially even sharing the 4G network itself.

However, having only a single 4G network will rob these operators of being able to boast of having a better coverage or faster network than the other.

Though Kapania did not specify whether or not the agreement will extend to 4G services, he did indicate that it will extend to the fiber network used to connect 4G towers to each other.

Kapania said Idea will add 3,500-5,000 fiber points on its networks in the current financial year, including via sharing with other operators. It currently has 9,500 fiber points. A single fiber point is often connected to several towers in the area.

On 4G expansion, Kapania said the company will add another 40,000 ‘broadband’ towers this year, most of which will be 4G.

The company already has around 40,000 4G cell sites and another 70,000 3G cell sites. With the incremental 40,000, the total 3G+4G stations will reach 1.5 lakh by March next year.

This will be enough to cater to the demand in Metros, big and small towns and more prosperous rural centers. Idea will not target deep rural areas in the ongoing phase of its 4g expansion, the CEO said.