Mobile network operators (MNOs) have significantly scaled down network roll-out and upgrade programmes recently. We estimate that roll-outs are at about 10%–20% of what they were only a few years ago, during the peak of 2G and 3G deployment. Some are contemplating outsourcing, others are assessing radio access network (RAN) sharing, and some are beginning to plan ahead for Long Term Evolution (LTE) deployment.
During peak deployment, MNOs were under tremendous pressure to deliver ‘launch sites’. The push to acquire and build sites has resulted in two painful legacies:
- precedents were set for mobile site rents and conditions with increasingly complex and punitive pricing and restrictions
- management of lease and site information did not keep pace with the changing market despite being the foundation of the business.
MNOs must now address these legacies in order to optimise opex spend (rent being a major component) and prepare for the future.
Preparing for the future – RAN sharing
RAN sharing with mature operators is hindered from the outset due to a lack of accurate site information. The key question is, will the capex spend be justified by the opex savings? In order to answer the question basic information is essential, as outlined below.
- What are the equipment rights in the lease and what is currently on site?
- Is site sharing permitted and is a payaway (sharing incoming site sharing revenue with the landlord) required? Are there sharers currently on the site?
- What space is there on the tower and at what height? Is there a cabin? Does it have space or is there space in the compound?
- Is there a landlord break (i.e. terms and conditions around giving notice to tenants)?
- Can the lease be assigned to anyone other than a ‘group company’?
Ideally, over 50 data points must be extracted from the lease and site information exercise. This can be done in many different ways (see Figure 1) depending on budget, resources and strategy.
Figure 1: Site and lease data collection [Source: Analysys Mason]
A network never stands still, so processes must be established in parallel that will capture any changes to the lease and site arrangements, otherwise the accuracy of the data will again diminish over time.
Once concluded, the work will pay dividends when considering a RAN share.
- Accurate valuation of the portfolio pre-merger – it is difficult to anticipate what data points will be agreed as the common basis for network property valuation between two or more RAN share partners. Valuation of a portfolio is challenging, and can include revenue from sharers, rent and rights on the site, the lease term without landlord break, or the ability to terminate the lease/assign the lease. If the MNOs in the RAN share have the data already available, this process becomes much easier.
- Roll-out strategy – if the data is available, sites can be efficiently segmented and an appropriate roll-out strategy adopted. Sites with low cost/no cost sharing and assignment rights could be identified for retention, and the remainder for disposal.
- Automated site selection using tools – a database of accurate, comprehensive information is required to take advantage of the huge benefits of such tools, otherwise, "rubbish in – rubbish out" will apply to every form of decision making going forward. When it comes to budgeting and forecasting roll-out timescales the tool can swiftly develop a very real and accurate business model and programme of works, rather than a ‘best guess’ based on assumptions. A best guess will never answer the key question, “Will opex savings justify the capex investment?”.
Other benefits
If RAN sharing is not an option, MNOs can still reap benefits from gaining a full understanding of their site and rental situation.
- A lease optimisation programme can be initiated – while this is not effective on all sites, this can lead to major cost savings, provided site lease data is comprehensive and the programme is planned meticulously.
- Intelligent new technology deployment – rather than blindly going into site upgrade programmes, sites that can be upgraded the most quickly and cheaply can be selected. At the very least, programme management and resource planning can be improved and cost optimised by segmenting the site types and allocating realistic timescales and budgets to each site type.
- Site share marketing – the site data will provide information on which sites can be shared without amending the lease. Payaway costs will be known up front. This paves the way for reciprocal rent-free sharing (assuming equal site share volumes per operator).
- Site sale – site portfolios with sharers have commanded huge sums. ‘Valuable’ sites with the best mix of rights and assignment clauses could be used for a sale and lease back, raising cash for investment in other programmes.
Conclusion
We recommend that MNOs should take advantage of the lull in site roll-out to prepare for the future. There are many activities MNOs should be working on in preparation for RAN share and LTE upgrades. And even if RAN sharing is not appropriate, opportunities to optimise the network property asset should be seriously considered, especially in the current financial climate. Business leaders must think creatively to deliver shareholder value in such challenging times.
