Counterpoint Research is attending Global MBB Forum on 10th and 11th October 2023
Our Research Vice Presidents, Neil Shah and Peter Richardson will be attending the Global MBB Forum 2023 at Dubai, UAE. You can schedule a meeting with them to discuss the latest trends in the technology, media and telecommunication sector and understand how our leading research and services can help your business.
When: 10th & 11th October 2023
Where: Dubai, UAE
About the event:
The 14th Global Mobile Broadband Forum, hosted by Huawei in cooperation with GSMA, GTI, and the SAMENA Telecommunications Council, this year will provide an exciting opportunity for players in the mobile and adjacent vertical ecosystems to explore 5G business success, promote ecosystem maturity, and accelerate 5.5G commercialization.
With a strong speaker lineup and innovative product launches, the mobile industry is meeting once again to explore how mobile broadband technology is shaping the future and continuing the transformation of people’s lives and industries.
Click here (or send us an email at contact@counterpointresearch.com) to schedule a meeting with them.
It has been little over a year since mobile operator O2 tied-up with cable broadband provider Virgin Media to create a new telecom giant ‘Virgin Media O2’. Unlike Three’s proposed takeover of O2, which was blocked by the regulators back in 2016 due to competition concerns, this merger was approved as it involved two service providers with complementary businesses creating a new entity to accelerate investments in 5G and fibre networks.
Recently, it has being reported that Vodafone and Three are in talks about a potential merger. The main rationale for coming together in this case seems to be to drive scale and reduce costs in the mobile sector, as opposed to convergence in the case of the O2 and Virgin Media merger.
UK telecom landscape
How likely is the Vodafone and Three merger to be approved?
Operators’ perspective: The UK is a competitive market, with operators providing unlimited data plans as well as a wide array of MVNOs offering discounted services. Vodafone, the current third largest operator, has been under pressure from its investors to improve returns, whereas Three, the UK’s number four operator, has reported flat revenue growth for last few quarters and has been vocal on the need for structural changes to the UK telecoms market. Therefore, the main reason behind the Vodafone and Three merger is to increase subscriber share (the merger would create a market leading entity) and lower operating costs.
Another rationale could be RAN sharing and cost reduction, as the two operators have a similar set of frequencies in the sub-6 GHz range. The two operators combined can create a more sustainable and stronger player with increased ability to network investments and benefit from economies of scale.
5G Spectrum Portfolio of Vodafone and Three UK
Regulator’s perspective: The primary concern around this deal would be the reduction of the number of players from four to three. Some studies show that such reduced competition can lead to increased prices and negatively impact service levels. In addition, regulators are wary of mergers creating a dominant player in the market. As a result, this merger may collapse for similar reasons as Three’s takeover bid of O2.
However, while the Vodafone and Three merger would create a market leading entity, the resultant approximate 30% subscriber market share would be similar to its competitors. In addition, regulators are suspected to be a little more sympathetic towards mergers these days than in the pre-pandemic times.
What has changed post-pandemic?
Connectivity services played a very important role throughout the pandemic, emerging as a lifeline for consumers. Many businesses and some aspects of life are now fully dependent on telecom services. Therefore, if a merger promises increased network investments to improve connectivity and quality of service, regulatory authorities are expected to be more flexible and take a softer stance than in the past.
M&A activity in other competitive markets of Europe
Spain: Orange (the second largest operator) and Masmovil (the fourth largest operator) recently signed an agreement worth €18.6 billion ($19 billion) to combine their operations and form a 50-50 joint venture. The new entity will become the country’s largest operator with more than 40% subscriber market share.
Italy: At the beginning of 2022, Vodafone and Iliad were in talks to merge their units amid cut-throat competition in the Italian market. However, Vodafone rejected Iliad’s preliminary offer of €11.25 billion ($12.92 billion) citing a lack of value-add for its shareholders. The operator is still ready to evaluate other opportunities.
Additionally, Telecom Italia (TIM) hopes to get the right valuation for its fixed-line assets, which the operator plans to sell and raise cash to cut its debt.
These developments indicate there is increasing consolidation occurring in both the mobile and fixed telecom space. Additionally, many operators have spun-off their tower business or launched joint ventures in order to raise money for network investments or reduce debts. For instance, Deutsche Telekom (DT) has recently announced the sale of 51% of its tower business, GD Towers, to a consortium for €17.5 billion ($17.5 billion). The transaction will help the operator with much needed cash to cut debt and proceed with its target of acquiring a majority stake of 50.1% in T-Mobile US (an increase from its current stake of 48.4%).
Viewpoint
The UK’s telecom market is characterised by fierce competition, and it is difficult for the operators to grow organically. Key factors that influence operators’ ROI include weakened bargaining power in the procurement of 5G network equipment (in view of the ban on Chinese vendors Huawei and ZTE), competition from other ecosystem players in the enterprise segment (particularly private networks) and increasing cost pressures. Mergers in such an environment help achieve economies of scale through an increased number of subscribers, pooling of resources and lower operating costs. It is likely that the Vodafone – Three merger will be approved and thus improve the overall quality of infrastructure, but only after close scrutiny from regulatory bodies.
Interestingly, Virgin Media O2, Vodafone and Sky are also rumoured to be interested in acquiring broadband service provider TalkTalk. Going by the recent trends it looks to be only a matter of time before we see the next mega-merger in the UK market. There is a high likelihood of the market evolving to a smaller number of integrated telecom operators offering fixed-mobile convergence services and diversifying the way they engage with consumers. One can see such positive impacts from the Virgin Media O2 case, as the new operator recently reported on its first anniversary that there is a growing adoption of converged services, with 45% of its broadband customers also taking a mobile contract.
Seoul, Hong Kong, New Delhi, Beijing, London, Buenos Aires, San Diego
February 13th, 2020
Ever since consolidation in 2013, the Radio Access Network (RAN) market has been dominated by three incumbent vendors: Huawei, Ericsson and Nokia. However, this status quo will start to be disrupted in 2020 as the roll out of 5G accelerates and as new entrants deploy open RAN technologies.
Open RAN deployments today are mostly greenfield builds or emerging market trials. However, major Mobile Network Operators (MNOs) are showing increasing interest. For example, NTT DoCoMo in Japan recently launched pre-commercial 5G trials using open RAN fronthaul interfaces on part of its network, while Vodafone hit the headlines last December by announcing plans to issue an open RAN RFI within two years to replace equipment at 150,000 of its European cell sites. Whether this happens or is just a PR gimmick to ruffle the Big Three, remains to be seen.
Regardless, the transition to open RAN will be a marathon and not a sprint. MNOs have already started to select their initial 5G radio partners. As a result, it is highly unlikely that any of the RAN market disrupters will land a significant share of any major MNO’s initial 5G build, even from Vodafone.
Opportunities:
In the short term, the best opportunities are likely to be in-building and private networks, particularly after 5G NR hardware becomes available in late 2020.
“In-building is probably one of the best markets to launch open RAN as high capacity requirements are not needed” said Gareth Owen, Associate Director at Counterpoint Research. “The private enterprise network market is another, as many enterprises, particularly industrial companies have an urgent need to invest in cellular systems, and the most capital efficient way of doing this is by means of an open, virtualized RAN, not a proprietary stack.” he added. Enterprises now have access to unlicensed spectrum for the first time, for example, the CBRS band in the US, and are not necessarily reliant on operators anymore.
In the case of MNOs, the most likely opportunity for open RAN vendors in the short term are for smallish greenfield network builds or in emerging markets where 4G and 5G is still in the planning stages. Several MNOs in developed countries are also looking to deploy open RAN in rural markets. However, new opportunities will emerge as 5G matures and MNOs start thinking about upgrades and enhancements to their networks.
Roll-out schedule, key issues:
Counterpoint believes that there is still significant research, lab testing and trials to complete, plus a few major challenges to be overcome, before widescale open RAN adoption happens. Although there will be some limited commercial roll outs during 2020, big scale open RAN deployments are probably at least 18-36 months away.
Key issues at present include scalability and interoperability. Can an open RAN network provide the capacity needed for widespread deployment, particularly with outdoor macro networks or at big indoor venues, and can MNOs interchange vendors’ software and hardware and still achieve the same performance? There is also a concern that the performance gap between x86-based commercial-off-the-shelf (COTS) servers and proprietary hardware is not converging as much as initially expected.
“To date, most open RAN network trials have focused on less demanding markets and it is only now that MNOs are starting trials in dense urban areas such as London, that provide much more challenging, real world conditions,” said Peter Richardson, Research Vice President at Counterpoint Research. “With regards to interoperability, at this stage vendors are just testing their own equipment to see if it complies with open RAN standards, rather than testing interoperability with each other’s products. However, the recent opening of a common test and integration centre in China, with further centres to follow elsewhere, is a positive step which should ultimately resolve this issue.” he added.
Although MNOs are looking for vendor diversity – especially with increasing restrictions on using market leader, Huawei’s products – equipment designed to open RAN specifications needs to mature before the technology can be deployed in commercial networks, at scale, as MNOs cannot risk exposing their customers to unreliable infrastructure. To succeed, new entrants will need to demonstrate that they are reliable partners, have good long-term prospects and ideally should be in a position to offer end-to-end solutions.
“The Race to Open RAN Will Be A Marathon, Not a Sprint!” is a three-part report which provides in-depth insights to the state of the open RAN market, as follows:
Part 1 – provides a detailed overview of the technology of open RAN and discusses key technical issues, including standards development, RAN fronthaul interface options, etc.
Part 2 – provides a detailed outline of the open RAN ecosystem with a focus on the most innovative software providers and fronthaul technology developers, including AltioStar, Mavenir, JMA Wireless, Parallel Wireless, Radisys, Dali Wireless, Phluido Technology, etc.
Part 3 – provides an overview of current pilots and pre-commercial trials (both greenfield and legacy networks) plus up-to-date plans about the open RAN activities of major MNOs.
Background:
Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of 13 years in the high-tech industry.
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