Lex: European telecoms
Published: June 3 2001 19:26GMT | Last Updated: June 3 2001 19:28GMT
Much fuss has been made about network sharing as the way to sort out the mess left by Germany's mobile licence auction. On Tuesday the regulator will decide just how much co-operation will be allowed. There is the whiff of bail-out in the air, and every chance that foolish new entrants who paid E8.5bn for third generation licences will be given more scope to cut costs through sharing infrastructure than they can reasonably have expected at the time of the auction.
This would benefit Sonera, Telefonica, KPN, British Telecommunications and France Telecom (Mobilcom) at the expense of the established Vodafone and Deutsche Telekom. Sharing base stations and radio access equipment might save each new entrant between 20 per cent and 30 per cent of capital expenditure, with a net present value of E1.5bn to E2bn. However, Germany would still have too many operators (six) chasing uncertain revenues. Network sharing does not remove the big obstacle to consolidation: the requirement for merging operators to give up one of their E8.5bn licences. Allowing companies to trade spectrum would, but this would involve rewriting licence terms. Better to allow market forces to rule, and let the weakest operator go out of business.
That said, network sharing could ease the way for some mooted cross- border mergers, by allaying fears that German 3G will be a black hole. It would also allow "three into one" rationalisation: two operators merge, give up one licence, and share their network with another company. Telefonica Moviles/BT Wireless, Telecom Italia Mobile/KPN Mobile and Telia/Sonera might all reward a second look.
news.ft.com
More whining, too much GSM.
One.Tel's Billion-Dollar Baby Likely To Remain An Orphan
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BY DAVID BRAUE (profile) | June 02, 2001
The extent of the strife surrounding the collapse of number-four wireless carrier One.Tel is still unfolding, but one thing is certain: the company's downfall will disrupt competition in the mobile space and leave $1 billion worth of Australia's newest mobile network rusting on its supports.
One.Tel's demise, coupled with the slow slide of cost-cutting reseller WorldxChange last week, may well indicate that the competition-driven free-for-all in Australia's telecommunications market is coming to a close. Fixed-line communications prices are so low that extracting viable margins from customers requires careful management and, often, subsidisation from far more-profitable mobile calls.
Yet even mobile calls are far less profitable for a company with a $1 billion monkey on its back, particularly since One.Tel had to trim its margins to make a convincing play in the ultra-competitive mobiles market. Had One.Tel survived until mobile number portability is introduced in September, those margins would have shrunk even more as assumed competition for mobile customers increases.
After the One.Tel network's launch last August, One.Tel chief technology officer Stephen Moore acknowledged to Wireless Authority that the company was venturing into a potentially harsh environment, but was confident that higher-margin value-added services would spawn a profitable mobile business.
Yet this strategy clearly didn't produce the results the company was hoping for, with 20/20 hindsight confirming that Australia probably really didn't need a fourth GSM network. And as Optus savages One.Tel's chances at redemption by grabbing the more than 220,000 One.Tel customers who were still using One.Tel's resold Optus services, it's clear that none of the top three mobile telcos have much use for One.Tel's GSM infrastructure.
This will inevitably force One.Tel to either heavily discount the network until someone picks it up, or to sell off its network in bits complementary to existing GSM networks run by Telstra, Optus and Vodafone.
But since all four GSM mobile networks basically replicate the same coverage areas, this approach may not win many takers. This tilts the balance instead towards a massive $1 billion fire sale for the company, which could potentially see the network become a target for AAPT/Telecom New Zealand or Hutchison Telecommunications, both of which have been developing mobile strategies and may benefit from One.Tel's existing network.
The network could, potentially, be a major benefit for those companies if the price is right. After all, the two recently joined forces in a potentially $1.25 billion deal to build 3G networks in Australia and New Zealand. One.Tel's Moore, however, last year said the Lucent Technologies network would have been able to be upgraded to support 3G for under $10 million; if this is true, and if One.Tel is forced to sell off its network for the $250 million or so it's probably worth on the market, it could substantially reduce the cost of entry into 3G for Hutchison and AAPT/TNZ.
This, of course, is pure speculation; for now, the fate of One.Tel's network rests in the hands of those charged with mopping up the financial disaster that the company's collapse has created.
Whatever becomes of the company, many observers were hardly surprised at the company's collapse. "The market in Australia is such that it's highly unlikely that a new player will come in and give it a go, [buying One.Tel's network] to start competing with Telstra and Optus," says telecommunications analyst Paul Budde of Paul Budde Communication, who blames the company's costly mobile network build for its financial implosion and expects it will be lucky to fetch $300 million when the network is sold off.
"A network like that needs at least one million users to be [viable], but to get one million customers you need to sell under cost price to attract customers to you in the hope they stay with you. That business model might have looked attractive four or five years ago, but very few players are willing to do that anymore. Buying a $1 billion network did not add any value to One.Tel's business, nor will it add any value to AAPT, Hutchison, Vodafone, Optus or Telstra's business. A network is a minor sort of thing; getting a customer base and looking after them is ten times as important."
australia.internet.com |
