Network sharing arrangements are becoming common for rich countries looking to ramp up competition and fast-track 5G rollout in their markets.
Network sharing refers to a bona fide arrangement between two or more telecommunications services and/or network providers for the purpose of sharing telecommunications network, transmission and related equipment (including active infrastructure assets) relating to their respective telecommunications businesses, including arrangements involving the sharing of part or all of a radio access network or core network.
The latest country to announce another network sharing agreement by their operators is Saudi Arabia which is looking to rollout 5G network for visitors and pilgrims coming to the city of Makkah, the birthplace of Islam in the next few years.
The 5G rollout being planned for Makkah is also part of a smart city initiative known as the MASAR project by the Saudi Arabian kingdom and will be anchored on a shared network arrangement. Umm Al-Qura Development and Construction Company, owner and executor of the MASAR project announced on Thursday, the signing of a 15 years framework agreement for strategic partnership with Advanced Communications and Electronics Systems Company (ACES). The agreement aims to equip and develop the 5G ICT wireless communication infrastructure (mobile services) to create a modern and intelligent environment for destination visitors, residents and visitors of Makkah, for 15 years.
Also, authorities elsewhere in the world are also making frantic efforts to extract juicy deals from 5G-centric investors.
In contrast, Nigerians may have to wait a bit longer to witness equal competitive attention on the 5G network from investors.
Read also: Social media as the new political wrestling ground
The Nigerian Communications Commission (NCC) was able to auction just 2 bands of the 5G spectrum and is hoping to auction the remaining two bands once MTN Nigeria and Mafab Communications, which won the auction, have fully deployed. However, with uncertainties hovering over the companies’ ability to deploy at scale and quickly, the country might be facing a low competitive market in the near future.
A source very close to one of the two winners said the company would only consider a shared network for its 5G licence only after it has made inroads and gained significant advantage with it. This enables them to recoup some of the investment before sharing.
The implication is that when 5G is finally ready for commercialisation, it would only be provided by the two of MTN Nigeria and Mafab or one of them in the unlikely event that only one was able to completely pay for the licence as well as other requirements. Even when both companies are able to complete licence payment, infrastructure deployment would depend on which of the telcos has acquired the financial muscle to move at speed.
Experts say factors responsible for this include the country’s poor economic outlook, poor fibre infrastructure deployment, inconsistent policy pronouncements, and difficult business environment.
“I don’t see it becoming very competitive in the near future,” says Rotimi Akapo, Partner at Advocaat Law Practice. “We are barely limping along with 4G. 4G deployment has been extremely slow compared with 3G and I expect the same for 5G compared with 4G.”
According to experts, a mobile network sharing agreement can support investment by relieving capital constraints, lowering the unit costs of expanding networks and generating network cost savings that reduce both the scale of the investment and operating costs.
The Makkah network arrangement is not the first time Saudi Arabia. The same arrangement was reached by Huawei and Zain in 2018 to develop a new network strategy in Saudi Arabia.
In Europe, Orange Belgium and Proximus, two mobile network operators in Belgium, came together to scale 5G fibre infrastructure deployment in the country.
Don Marlow, former economic adviser for Ofcom and consultant with Oxera, explains the need for shared network arrangement. According to him, with the increase in data demand, telecom operators seek to remain relevant and competitive by ensuring that they can offer the latest technology like 5G. However, they are faced with needing to upgrade and expand their networks, hence the encounter with increased capital and operating expenditure (CAPEX and OPEX) requirements, in an environment where retail revenues per user have declined.
“As Mobile Network Operators (MNOs) have explored new ways in which the costs of investment can be shared, without further consolidation in the market through mergers, they have come to see NSAs as increasingly attractive,” Marlow notes.
In the United Kingdom, the government is directly involved in nudging telcos towards embracing a shared network arrangement. In 2020, the UK government pledged to contribute £500 million as part of a £1.03 billion fund to telcos in a plan to include reciprocal agreements between the telcos to share existing infrastructure and also joint investments to build telco-neutral sites for total not-spots. The telcos are expected to put forward £503 million.
Akapo who considers the arrangement as the way to go points out that the countries practising it with success are developed and mature markets where the regulator is able to ensure the highest quality of service.
This is not the case with Nigeria. The fear of network congestion and quality of service is a real one and does not give the regulators and even operators the confidence to share networks. Some of the telcos have very low capacity.
“The existing infrastructure maintained by most operators barely provides the kind of quality that NCC requires, you can then imagine the strain on such infrastructure if it is shared without additional investment in those networks,” Akapo said. “Fiber for 5G is part of the challenge, but the fiber must be connected to a tower that must be run by a 24 hour generator.”
Operators like MTN Nigeria have outsourced their tower needs to third parties such as IHS Towers. However, with the increased electricity requirements of 5G towers, it could mean IHS’s OPEX rises significantly and this will in turn impact the cost MTN bears.
In 2021, the telco signed a similar arrangement with Telkom South Africa which allows users of the latter to roam on the MTN network. Roaming has reportedly become common in South Africa in recent years as MTN also allows Cell C to roam on its network. Cell C is now considering getting rid of its tower infrastructure entirely by 2025 and permanently roam on other networks.
MTN is however unlikely to rush to share its 5G network in Nigeria, particularly as the real use cases for 5G are barely available in the country.
