Infrastructure sharing: opportunities and threats for MENA telecom operators

The study also addresses the impact that infrastructure sharing can have on telecom sector development and how it can support the next wave of growth in the MENA telecom markets.

'Infrastructure sharing can benefit fixed and mobile operators alike; while fixed operators are re-structuring to leverage the sharing model, as witnessed by the separation in the UK and more recently in Sweden - mobile operators are considered the sharing frontrunners,' said Bahjat El-Darwiche, a Principal in the Communication and Technology Practice with Booz Allen Hamilton.

As pressure mounts and markets maintain the growth pattern, operators should consider options to salvage profit levels, focusing on untapped revenues and cost optimization. 'Infrastructure sharing is a form of cost optimization and can reduce capital expenditure components by as much as 40%,' said Louay Abou Chanab, an Associate in the Communication and Technology Practice with Booz Allen Hamilton. 'When looking at the case of two specific mobile operators in the MENA region, savings can mount to USD 250 million over a period of 3 years, should they decide to join forces in deploying their respective networks,' added Abou Chanab.

Different forms of infrastructure sharing are possible, ranging from basic unbundling and national roaming, to advanced forms like collocation and spectrum sharing. In the MENA region, National Roaming is used extensively in countries like Jordan, Morocco, Oman, Saudi Arabia and the United Arab Emirates. Unbundling is now starting to gather pace, with Egypt and Saudi Arabia as leaders. Other forms of sharing are bound to develop, given the expected returns to incumbents and new entrants alike.

'Regulators in the MENA region should also take an active role in incentivizing the development of infrastructure sharing, by illustrating potential gains for different stakeholders and where needed, introducing enabling regulations,' noted El-Darwiche. Apart from direct cost savings, infrastructure sharing will release needed capital for strategic investments and shift the focus to service innovation. Still, should regulators decide to intervene, they ought to carefully consider what to mandate, at what price and how to enforce it.

MENA operators are growing in number and size significantly. More than 10 fixed and mobile licenses were issued over the past two years in countries like Egypt Kuwait, Qatar, Saudi Arabia and others. The liberalization trend, coupled with infrastructure sharing prospects offers a potential opportunity for all the stakeholders in each market. Incumbents like Etisalat and Saudi Telecom can optimize the use of their existing infrastructure and generate new revenue that can be channeled to international expansions. On the other hand, new entrants leveraging infrastructure sharing will be able to focus on service offerings, with limited rollout burdens.

In liberalized fixed markets like Bahrain, Egypt, Morocco and Saudi Arabia, growth and success rely extensively on sharing the incumbent's local loop, given the difficulty to rollout competing access networks. Market reports indicate that since local loop unbundling was enforced in Morocco earlier this year, the broadband market grew 19% in a period of 6 months.

The MENA region is also heading toward service-based competition, with countries like Jordan taking the lead and others like Bahrain, Oman and Saudi Arabia voicing their efforts to get ready. 'Service-based licenses allowing the introduction of virtual operators are expected over the course of the coming two years in the MENA region,' states El-Darwiche. 'Hence, incumbents and other facility-based operators should gear-up for sharing their networks and host service-based operators'.

In the longer term, discussions about spectrum sharing are bound to emerge in the MENA region, given that the spectrum is scarce, as witnessed by the bands allocated to new licensees. Spectrum trading on a commercial basis is now growing in Europe and a similar trend will materialize in the MENA region in the medium term.

Going forward, and as discussions about the commoditization of telecom networks are materializing, with the separation of network and service provisioning on the rise, infrastructure sharing is expected to reach new heights in the MENA region. Incumbents and new entrants must go beyond the limited-scope services like national roaming to explore advanced sharing possibilities like duct sharing or joint network rollout. Competing operators should identify infrastructure synergies that would pave the way for lower costs and better service offerings.