Coopetition is becoming permanent fixture of 5G world

It might be a management consultant phrase, enough to have some clawing their eyes out, but coopetition is quickly becoming the norm as telcos drive towards the elusive goal of ROI.

The latest firms to enter into the new-era relationship are Orange and Proximus. Announced this week, the duo has signed a term-sheet to enter into a mobile access network sharing agreement by the end of the year. The scope of the partnership will be to meet raising demands in terms of mobile network quality and indoor coverage.

“The signing of the term sheet is an important step in reaching a final mobile access network sharing agreement between Proximus and Orange Belgium,” said Dominique Leroy, CEO of Proximus. “It will allow us to embark on a faster and broader 5G roll-out while improving mobile network capacity and coverage to the benefit of our customers and while keeping a strong and differentiated customer experience.”

“Mobile access network sharing is a trend in Europe which benefits consumers, as it enables more efficient investments to cope with the increasing data consumption,” said Michaël Trabbia, CEO of Orange Belgium. “The timing of this mobile access network sharing agreement is important as it will allow us to accelerate 5G roll-out, while bringing significant environmental benefits by reducing the combined energy consumption by 20%.”

This is a very simple partnership ultimately. The two telcos will enter into a shared infrastructure agreement, it seems both passive and active infrastructure is included but will rely on their own spectrum to differentiate on customer experience. This does appear to be an increasingly common strategy across the European continent to drive the commercial appeal of the connectivity business.

Another example of such business is in the UK, where the telcos have paired off to create joint-ventures to own and manage passive infrastructure in certain regions. CTIL and MBNL are the JVs in question and allow the four MNOs to share the expensive job of civil engineering but differentiate their offerings on the active equipment being installed on the masts and spectrum assets.

One of the reasons such partnerships are becoming more common across Europe is scale. With more than 100 different telcos across the continent, the telcos cannot achieve the same subscriber bases as counterparts in the likes of the US and China. This impacts procurement strategies as well as the ability to drive ROI in the mid-term.

Bearing this in mind, densification and network rollout into the rural communities becomes a problem. 5G is eventually going to force the telcos to acquire more mobile sites in the urban areas, to deal with the traffic increases but also to compensate for shorter spectrum ranges on higher-frequency bands. The rural environments are of course less commercially attractive due to the lower population density, but there are both commercial and regulatory demands to prevent a digital divide.

“The deal between Orange and Proximus is just the latest in a series of network partnerships designed to keep a lid on costs and accelerate deployment,” said Kester Mann of CCS Insight. “This is particularly important at the start of the new 5G era as operators continue to scratch their heads over the business case for investment.

“Although the approach could limit opportunities for operators to differentiate based on connectivity, it could free up investment in other areas such as content, vertical markets and new services. This can only be to the benefit of the consumer.

“We should expect further industry collaboration going forward. This could include the possibility of more innovative models such as shared networks between all operators in a single market or ownership of assets such as spectrum and infrastructure by independent third parties or even government.”

Another recent example of this type of coopetition is in Japan. Last week, KDDI and Softbank came to an agreement to share infrastructure in rural environments. This initiative is also geared towards reducing the burden of capital expenditure in delivering 5G to every corner of society. TIM and Vodafone Italia are another duo exploring the coopetition play to tackle the issue of rural 5G connectivity.

Elsewhere in the telco world, coopetition is emerging in the services game.

There are numerous examples of telcos buddying-up, for most cases with telcos outside of their commercial jurisdiction, to jointly develop services for 5G epoch. As it stands, 5G is nothing more than a ‘bigger, badder, faster’ version of 4G, though if the financial promises are to be realised differentiation is needed. For most, this means venturing into the murky world of enterprise services.

Last month, SK Telecom and Deutsche Telekom announced a partnership which would develop various technologies to improve indoor coverage and explore low-latency media services. A long-standing partnership between DT and Orange has led to the emergence of Djingo, a smart-assistant to challenge the dominance of the OTTs in the smart home.

Coopetition might sound like a buzzword fit for boardrooms of coffee drinkers and overpaid management consultants, but it is a trend which is slowly emerging in the telco world. And in some cases, it might just be the perfect solution to drive towards the long-overdue profits.