Consolidation Prospects and Implications for 5G
2017.05.08   |   25 pages   |   Direction, Strategy and Brand Differentiation

Author:
Liam Mimnagh


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Consolidation has been the topic of many conversations and opinion pieces in early 2017.  In the US, the new Trump administration seems to have brought new hope to network operators that the regulator (the FCC) may be more in deal mode and open to constructive merger and acquisition (M&A) proposals. 

In Europe, by contrast, the regulators have recently re-committed to maintaining four-player markets, after allowing consolidation in Germany, Austria and Ireland, and perhaps based on the results there. 

  • The current indication is that cross-border consolidation may be more favourably considered here.

MNOs have witnessed major disruptions to their business models due to intense competition and disintermediation at the hands of digital players, exacerbated by fragmented regulatory policy (particularly in Europe) and restrictive rules such as net neutrality.  

MNOs are now touting consolidation as necessary to make investment in 5G networks worthwhile (along with a range of protections, such as longer licences).

Have digital players shifted competition to the service level away from the transport infrastructure (network)?  If so, does this make the number of network operators in a market irrelevant to discussions of consumer and economic benefits?

This report looks at the scale issues MNOs face in rolling out 5G and the case MNOs are making to justify consolidation.  It examines regulatory approaches and thinking, including propensity to allow consolidation or preference for other approaches.  It concludes with recommendations for MNOs seeking to address the issues and influence regulatory (and competitor) impact on their future.

 

Companies: SK Telecom, Korea Telecom, GSMA, Apple, Google, Facebook, Amazon, Deutsche Telekom, Telefonica O2 Deutschland, Three UK, Orange, Drillisch, Telia Company, Telenor, TT-Netvaerket, O2 UK, Vodafone UK, Vodafone Germany, Vodafone India, Vodafone Netherlands, Liberty Global, Virgin Media, Bouygues Telecom, Free, Iliad, Wind, T-Mobile USA, AT&T, Sprint, SoftBank,Reliance Jio, Aircell, Reliance Communications, Tata Teleservices, MTS, Bharti Airtel, Idea Cellular, KPN, Bpost, PostNL, America Movil, T-Mobile Netherlands, E-Plus, EE, BT, Freeview, Arqiva, Openreach, Korea Telecom Rwanda Networks, MTN Rwands, Airtel Rwanda, Tigo Rwanda, Red Compartida, Telcel, Telmex, FCC, EU, Ofcom,   

Countries: Denmark, France, Germany, India, Italy, Netherlands, Mexico, Rwanda, UK, USA, 

Keywords: digital disintermediation, facilities-based conpetition, OTT, revenue consolidation, open access network competition, PPP, cable players, business models, Capex, fibre, public-private partnership, future networks, ROI, Merger & Acquisition, digital natives, Consolidation, wholesale access, digital content, Investment, M&A, revenue market share, spectrum, 5G manifesto, digital disruption, MVNO, regulation, 3G, MNO, service providers, monopoly, 5G, 4G, network capex, price competition, Project AirGig, 5G architecture,

1

Overview

1

2

Introduction

2

2.1

Background

2

2.2

Report Content

2

2.3

Currency and Conversions

3

2.4

Further Questions and Feedback

3

3

Commercial & Investment Drivers

5

3.1

5G Network Requirements and Costs

5

3.2

Current MNO Capex Trends

6

3.3

Loss of Customer Ownership to Digital Natives

7

3.4

Regulatory & Systemic Headwinds

8

3.4.1

Spectrum & Standardisation

8

3.4.2

Competition, Regulation and Market Structure

9

3.4.3

Opposition to Consolidation

10

4

Consolidation Examples

12

4.1

Background

12

4.2

Revenue Consolidation in India

12

4.3

Revenue Consolidation in Europe

13

4.3.1

The Netherlands – Consolidation in Revenue Share

14

4.3.2

Germany – Consolidation in Mobile Revenue Share

15

4.4

UK – Mobile Consolidation Blocked

15

5

Shifts in Regulatory Approach

17

5.1

USA - New Administration – New Approach

17

5.2

Europe – A Slower Pace of Change

18

5.2.1

Overall Approach

18

5.2.2

Consequences of European Cross-border Consolidation

18

6

Model Approaches

20

6.1

Number of Networks

20

6.2

Facilities-based or Open Access Network Competition

21

6.2.1

Facilities-based Network Competition

21

6.2.2

Open Access Approach – Public-Private Partnership

22

6.2.2.1

Rwanda

22

6.2.2.2

Mexico

23

7

Conclusions and Recommendations

24

 

Appendix – Feedback Questions

26

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