Sharing of infrastructure key to cutting costs
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By Michael Ouma In order to realise savings on their operational expenses and enable them concentrate on service provision, which is their core business, telecommunications firms are being urged to consider sharing and leasing of infrastructure. The calls come after the recent announcement by Zain Kenya and Essar Telecom Kenya (ETK) to share network infrastructure. As per the deal, the two firms agreed to share 300 base stations for the next 15 years. ETK, previously known as Econet Wireless Kenya and operating under the yu brand, has over 100 base stations in Nairobi and plans to expand its network nationwide by the end of 2009. The deal is to benefit Zain by reducing base station operational costs, as well as strengthening its network coverage in the nation’s capital. Janne Takala, head of strategy and business development, managed services, at Nokia Siemens Networks says "the ever increasing cost pressure in most markets remains a key challenge to cellular service providers leading operators to get into network sharing." "Because of the ever-increasing cost pressure in most markets which remains a key challenge to service providers, one effective way to reduce investment and operation costs is to share network infrastructure with competitors," says Mr Takala. Core activities "It can offer significant network capital and operational expenditure savings for the service providers," says Takala, adding that depending on the different network sharing methods and network scenarios, savings of up to 40 per cent can be achieved. Though more evident in more developed markets — Australia, Sweden and UK — Takala says the explosive growth in emerging markets is also fueling the need for network sharing. In Africa, network sharing is also being practiced in Tanzania, Ghana, South Africa, Nigeria, among other countries. The benefits of infrastructure sharing include cost savings as management and maintenance cost is split up amongst multiple operators and faster time to market guarantee for operators as the sites are already deployed leading to speedy roll-out. It also leads to manpower saving as well as freeing up management bandwidth for core activities. Various network-sharing models exist. There is the joint consolidation of existing networks to ensure to allow cellular service providers to focus on key differentiating activities, like the launch of new services and customer acquisition and retention besides improving asset utilisation leading to capital and operational expenditure savings. The other model, says Takala, involves joint roll-out of a new (complementary) network (e.g. fixed broadband access) or joint network in uncovered regions to allow for improved time-to-market, risk sharing, besides significant capital and operational expenditure savings.