Orange says that increased RAN sharing across Europe could save it a billion Euros in combined capex and opex savings over the next ten years.
The company, which has RAN sharing agreements with Vodafone in Spain and Proximus in Belgium, is committed to finding more potential sharing opportunities across its European asset base.
For a sense of the savings that can accrue, look to Spain. In Spain, Orange and Vodafone have an agreement to share sites in towns of fewer than 175,000 population. In cities over that mark, Orange will share 5G buildout with MasMovil. Spain CEO Laurent Paillassot said that Orange would have access to 19,000 shared sites in the country. A separate slide from Fernandez showed that Orange owns 7,700 sites in the country. That’s a significant extension to Orange’s own site asset base, achieved via its sharing deals, and without the sort of investment and ongoing maintenance cost that would come with an additional 10,000 sites.
Ramon Fernandez, Chief Executive Officer Finance, Performance and Europe, said that following trendsetters Spain and Belgium “more announcements could follow”. And he warned regulators and competition authorities not to throw up objections, stating that it would not be fair for telcos to be denied consolidation opportunities and also the ability to share sites with competitors.
When you look at most countries, coverage is not any more a differentiation, we all pretty much have the same coverage
Michael Trabbia, CEO of Orange Belgium, which has an active RAN share with Proximus that is being investigated by competition authorities, said, “We should share all that doesn’t bring differentiation. When you look at most countries, coverage is not any more a differentiation, we all pretty much have the same coverage.”
As well as saving the operator money, RAN shares can increase the speed of 5G rollouts, Trabbia said – something that is a bit of a talking point in Belgium, which may not have deployable 5G networks until 2022 in any case, due to delays in making spectrum available. But it will be a good talking point in other markets, especially allied to the argument that sharing can increase rural, indoor and dense urban coverage and capacities – all key points for regulators.
Trabbia also said that the sharing deal would reduce overall energy consumption in the RAN by 20% – and the green angle is clearly something Orange hopes to use as it fights its case in favour of more active sharing.
What should a TowerCo look like?
Alongside its sharing strategy, Orange is also fully part of a trend to move its physical site asset portfolio into a “TowerCo”. Deutsche Telekom (DT), Vodafone Group, Telefonica and Orange have all committed to do something similar in recent months.
The decision telcos face is how much control of their sites to cede. For instance, they could seek an outside investor to inject capital and form a JV. Or they could sell the portfolio to a TowerCo that they might hold a minor stake in and lease back space.In each case they would look to monetise towers by selling space to competitors, which could be more like a passive RAN share or just a simple site sublet.
Orange Europe has over 40,000 sites, 23,000 of which are actual towers – the rest rootops, building etc. It has said that it will start the process in 2020 of moving these to a separate tower company. Fernandez said it is still looking at exactly how it would structure its TowerCo(s), but one thing Orange does know is that it wants to retain full control of the sites (apart from those deemed surplus and non-strategic, such as the 1,500 it sold at a “nice premium” to Cellnex in Spain.)
Maybe today if you have pressure to monetise, in the medium to long term you will then see what is the result of these decisions.
Fernandez said, “In Europe a number of operators have gone in this direction – with or without the perspective of monetisation or opening to third parties. DT has a fully owned 100% controlled subsidiary and this is what we are starting to do.”
“In a number of European countries we have already started RAN sharing, and externalising management of the network, and as a result we have a high tenancy ratio already. The objective is to manage this in the most efficient way and that then creates the potential for further steps.
Fernandez said though, that Orange is “convinced [towers and site ownership] is absolutely strategic expect in some very limited use cases. They are critical for 5G and the Edge [compute] that is coming – where having control of the network will be a key differentiator. Maybe today if you have pressure to monetise, in the medium to long term you will then see what is the result of these decisions.”
Spain is a slightly unusual case in that it retains three group T1 operators in competition – all of who have declared an intention to form TowerCos to manage site infrastructure. Can they all rent capacity and space to each other? Country CEO Paillassot said, “Obviously we would be happy to do something with Vodafone, where we are splitting (sharing) already. To add on a Towerco when there are requirements for additional coverage for 4G and 5G gives us the ability to do so more efficiently. So there is room.”