Active network sharing business models in Asia–Pacific Research Report Active network sharing business models in Asia–Pacific April 2014 Nipun Jaiswal and Chris Nicoll © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 2 About this report . This report analyses active network sharing in Asia–Pacific Figure 1: Summary of geographical coverage [Source: Analysys Mason, 2014] (APAC) from a technical and business perspective. Regions Countries . It defines the main types of network infrastructure sharing: passive, active and core network sharing. Developed Asia–Pacific (DVAP) . Australia . Singapore . Hong Kong . South Korea . The report provides a detailed summary of active network . Japan . Taiwan sharing operator partnerships in APAC, as well as analysis of the take-up of active network sharing in the region. Emerging Asia–Pacific (EMAP) . Bangladesh . Malaysia . It also describes the key business models that operators use . China . Pakistan to implement active network sharing. India . Thailand . The report presents in-depth case studies and strategies . Indonesia . Vietnam showing how operators have successfully, or unsuccessfully, implemented active network sharing. Figure 2: List of operators covered in case studies [Source: Analysys Mason, 2014] . It concludes with recommendations for operators. Operators Country . This report is based on several sources: . PCCW Mobile HK . 3 Hong Kong Hong Kong Analysys Mason’s research – including our Wireless networks tracker, and telecoms market reports for . EVN Telecom (now . Vietnamobile Vietnam Hong Kong, Malaysia and Vietnam Viettel Telecom) interviews with stakeholders in APAC. Maxis . REDtone International Malaysia . Maxis . U Mobile Malaysia © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 3 Contents Slide no. Slide no. 6. Executive summary 23. Operator case studies 7. Executive summary [1] 24. Operator case studies: Business cases that drive operators to share 8. Executive summary [2] active network infrastructure 9. Types of network infrastructure sharing 25. Case study – 3 and PCCW Mobile: Hong Kong mobile market overview 10. Types of network infrastructure sharing 26. Case study – 3 and PCCW Mobile: Operator overview 11. Asia–Pacific market analysis and insights 27. Case study – 3 and PCCW Mobile: The operators bid jointly to 12. Passive sharing has proliferated in APAC, whereas active network win paired LTE 2.6GHz spectrum and agreed to share their RAN sharing has failed to gain traction 28. Case study – EVN Telecom and Vietnamobile: Vietnam mobile 13. Active sharing deals in APAC have occurred for a variety of reasons market overview stretching back to 2004, but have not gained significant momentum 29. Case study – EVN Telecom and Vietnamobile: Operator overview 14. The technical and financial structures of these deals vary considerably 30. Case study – EVN Telecom and Vietnamobile: Two small players 15. Operators’ focus on coverage-based competitive differentiation has partnered to implement a shared greenfield roll-out hindered adoption of active network sharing in APAC 31. Case study – Maxis and REDtone: Malaysia mobile market 16. Malaysia is the most progressive market in APAC in terms of active overview network sharing 32. Case study – Maxis and REDtone: Operator overview 17. Strategic business case for active network sharing in Asia–Pacific 33. Case study – Maxis and REDtone: The regulator encouraged 18. There are four business models for active network sharing network sharing by awarding spectrum to several incumbents 19. Business model: Greenfield 34. Case study – Maxis and U Mobile: Operator overview 20. Business model: Mutual leasing 35. Case study – Maxis and U Mobile: Several factors influenced 21. Business model: Wholesale the operators’ decision to adopt RAN sharing 22. Business model: Consolidation © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 4 Contents Slide no. 36. Case study – Maxis and U Mobile: Network sharing can generate revenue in the long term as well as capex and opex savings 37. Recommendations 38. Recommendation 1: Operators in EMAP should consider active network sharing for their forthcoming LTE deployments [1] 39. Recommendation 1: Operators in EMAP should consider active network sharing for their forthcoming LTE deployments [2] 40. Recommendation 2: Operators can address the rural broadband coverage challenge by collaborating and active network sharing 41. About the author and Analysys Mason 42. About the author 43. About Analysys Mason 44. Research from Analysys Mason 45. Consulting from Analysys Mason © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 5 List of figures Figure 1: Summary of geographical coverage Figure 13: Mobile market share of active SIMs by operator, Vietnam, 2009– Figure 2: List of operators covered in case studies 9M 2013 Figure 3: Infrastructure elements included in different types of network Figure 14: Active SIMs by subscription type, and penetration rates of sharing contract subscriptions and mobile broadband, Malaysia, 2009–9M 2013 Figure 4: Publicly announced network sharing arrangements by type, Asia–Pacific Figure 15: Mobile market share of active SIMs by operator, Malaysia, 3Q 2013 Figure 5a–b: Publicly announced active network sharing agreements in Asia– Pacific Figure 16: Factors that motivated Maxis and U Mobile to share a RAN Figure 6: Factors that have hindered adoption of active network sharing in Figure 17: The benefits of RAN sharing for Maxis and U Mobile Asia–Pacific Figure 18: Operational and planned LTE networks by region, November Figure 7: Active network sharing business models 2013 Figure 8: The greenfield model for active network sharing Figure 19: LTE trials in progress by region, November 2013 Figure 9: The mutual leasing model for active network sharing Figure 20: Examples of publicly announced active network sharing partnerships that aim to increase broadband coverage of rural Figure 10: The wholesale model for active network sharing areas, worldwide Figure 11: The consolidation model for active network sharing Figure 12: Mobile market share based on active subscribers, Hong Kong, 2013 © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 13 Active sharing deals in APAC have occurred for a variety of reasons stretching back to 2004, but have not gained significant momentum Figure 5a: Publicly announced active network sharing agreements in Asia–Pacific [Source: Analysys Mason, 2014] Operating Sharing Deal length Operator 1 Operator 2 Country Type of sharing Launch date Deal value model technology (years) Hutchison W-CDMA AUD450m 8 (ended August Telstra Australia Greenfield Active RAN December 2004 Telecommunications (2100MHz) (USD413m) 2012) AUD700m Singtel Optus Vodafone Australia Greenfield W-CDMA Active RAN November 2004 10 (USD642m) Active RAN Banglalink Grameenphone Bangladesh Greenfield No data February 2010 No data No data and backhaul Mutual Celcom Axiata Altel Malaysia leasing LTE (2.6GHz) Active RAN July 2013 No data No data (MVNO) GSM, W-CDMA, Maxis U Mobile Malaysia Wholesale Active RAN October 2011 No data 10 LTE (2.6GHz) REDtone Mutual LTE (2.6 GHz), Active RAN 5 (could be Maxis Malaysia July 2012 No data International leasing 2G, 3G and spectrum extended to 10) Wholesale MCMC REDtone MYR82.5m Malaysia (neutral No data Active RAN November 2012 3 (regulator) International (USD26m) host) PCCW Mobile HK 3 Hong Kong Hong Kong Greenfield LTE (2.6GHz) RAN and MOCN August 2011 No data No data EVN Telecom Vietnamobile Vietnam Greenfield W-CDMA Active RAN April 2009 USD338m No data © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 19 Greenfield Business model: Greenfield model . In this model, the operators form a new joint venture (JV) Figure 8: The greenfield model for active network sharing [Source: Analysys company. It is usually a 50:50 JV launched under a new Mason, 2014] brand name. Greenfield . The new JV company bids for the spectrum and rolls out a new shared network. MNO 1 MNO 2 . The operators can choose to share the network roll-out through the new JV company and keep their commercial Limited Limited services separate. network network . The greenfield model helps the operators to reduce capex Joint venture and opex as well as spectrum acquisition costs, and enables operators to expedite network roll-out and service commercialisation. Joint spectrum bidding (3G/4G) . Joint roll-out of the new network allows the operators to fulfil the minimum coverage requirements under the terms of licence allocation. The operators may have found it difficult to do so had they acquired the licence individually. No leasing . Some examples of operators that have deployed this model in APAC are: 3 and PCCW Mobile (Hong Kong), EVN Telecom and Vietnamobile (Vietnam), Hutchison Telecommunications and Telstra (Australia), and Optus and Joint greenfield network roll-out (new) Vodafone (Australia). New shared network build-out © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 41 Executive summary Types of network infrastructure sharing Asia–Pacific market analysis and insights Strategic business case for active network sharing in Asia–Pacific Operator case studies Recommendations About the authors and Analysys Mason © Analysys Mason Limited 2014 Active network sharing business models in Asia–Pacific 42 About the authors Nipun Jaiswal (Analyst) is an