Vodafone and O2 Extend UK Network Sharing to 5G Mobile and Fibre

Mobile operators Vodafone and O2 have today announced a tentative agreement that will see their current UK network sharing deal being extended to include future 5G (mobile broadband) services. On top of that they’re also exploring the prospect of delivering a “shared, future proof fibre” (fibre optic) transmission network.

At present both operators already have a network sharing agreement, which is managed by Cornerstone Telecommunications Infrastructure Limited (CTIL). The 50:50 joint venture has been running since 2012 and is also known to work with over 12,000 individual landlords and most major property portfolio organisations.

CTIL helps both operators to generate efficiencies in cell site deployment and the operation of their network infrastructure (inc. cost savings). On top of that it also gives them a greater choice of locations and means they can strengthen the quality of their network coverage.

We expected that they would at some point look to extend this arrangement in order to help balance against the high cost of building future ultrafast 5G mobile services, which will tentatively start to be commercially deployed in the UK from later in 2019. Indeed O2 and Vodafone have now “entered into non-binding heads of terms” to do just that.

The deal should enable both operators to “deploy 5G faster” and to reach a “wider geographic area” (i.e. reach more customers), albeit at a lower cost than if they were to act alone. In addition, both parties will look to extend greater network autonomy in a number of larger cities by deploying their own separate radio equipment on approximately 2,500 sites (represents around 15% of sites outside London).

The low latency Gigabit data speeds of 5G, and potential for it to be used as part of a fixed wireless broadband network, will also require extra capacity, which means feeding their masts and base stations with even faster fibre optic links. In response Vodafone and O2 said they were “exploring options” around their future transmission operating model, which could drive synergies in the investment and operation of their end-to-end networks.

Nick Jeffery, CEO of Vodafone UK, said:

“We believe that these plans will generate significant benefits for our business and our customers as we move into the digital era of connected devices, appliances and systems on a mass scale. Customers will benefit from the best 5G experience available and we will deliver even faster speeds by using our spectrum holding more effectively.”

Mark Evans, CEO of Telefónica UK, said:

“I’m excited by the potential of these plans to meet the future needs of our customers while delivering value for our business. In addition, these plans would allow us to utilise the spectrum we acquired in the last auction very effectively.”

Finally, Vodafone and O2 said they intend to devolve additional activities to CTIL. The operators claim this will empower CTIL to take an “enhanced role” in the operation of the passive infrastructure, in order to “improve the efficiency of its operations” and pursue opportunities to “add further third party tenants to the towers“. The parties will thus explore a “potential monetisation” of CTIL after the new arrangements have been finalised.

At this stage the deal remains subject to an agreement on detailed terms and all of the usual regulatory approvals. Nevertheless if everything goes according to plan then a final deal should be signed sometime this year.