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The role of network sharing in transforming the operator business: Impact on profitability and competition

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  • Mölleryd, Bengt G.
  • Markendahl, Jan

Abstract

This paper focuses on network sharing on mobile networks and examines the impact on profitability and competition. Network sharing refers to that operators collaborates with its competitors on part of the production of mobile services, and it could vary from passive sharing, like sharing of sites or basic facilities, to active sharing, like radio access networks or even entire networks. The paper takes a global scope on examining the extent of network sharing. The emergence of a sector with dedicated infrastructure or tower companies are documented through a mapping of listed companies' which facilities a detailed financial analysis. The rationale for network sharing could be grouped into three factors: 1) lower cost and reduce capital spending as well as to raise capital, 2) improve coverage and services, and 3) reduce the negative impact on the environment. The increased usage of network sharing throughout the world signals that it is going to develop and in the longer run move focus from infrastructure based to service based competition. Although operators have been able to lower network operation cost the impact on profitability varies. The dedicated tower and infrastructure companies manage considerable higher debt ratios compared to operators potentially having a transformative impact on the operator business. Despite an extensive usage of network sharing - where competitors are collaborating - competition on the retail market prevails. A potential spillover effect from network collaboration to the downstream market is a risk, but the social benefit with larger coverage and improved capacity has so far given extensive support for network sharing.

Suggested Citation

  • Mölleryd, Bengt G. & Markendahl, Jan, 2013. "The role of network sharing in transforming the operator business: Impact on profitability and competition," 24th European Regional ITS Conference, Florence 2013 88459, International Telecommunications Society (ITS).
  • Handle: RePEc:zbw:itse13:88459
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    References listed on IDEAS

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    1. Akematsu, Yuji & Shinohara, Sobee & Tsuji, Masatsugu, 2012. "Empirical analysis of factors promoting the Japanese 3G mobile phone," Telecommunications Policy, Elsevier, vol. 36(3), pages 175-186.
    2. Srinuan, Chalita & Srinuan, Pratompong & Bohlin, Erik, 2011. "An analysis of mobile internet service in Thailand: Implications for bridging digital divide," 8th ITS Asia-Pacific Regional Conference, Taipei 2011: Convergence in the Digital Age 52326, International Telecommunications Society (ITS).
    3. Lehr, William H. & Chapin, John M., 2010. "On the convergence of wired and wireless access network architectures," Information Economics and Policy, Elsevier, vol. 22(1), pages 33-41, March.
    4. Gerpott, Torsten J. & Thomas, Sandra & Weichert, Michael, 2013. "Characteristics and mobile Internet use intensity of consumers with different types of advanced handsets: An exploratory empirical study of iPhone, Android and other web-enabled mobile users in German," Telecommunications Policy, Elsevier, vol. 37(4), pages 357-371.
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    More about this item

    Keywords

    Network sharing; mobile network operators; infrastructure; tower companies; operational and capital expenditures; competition; profitability; financial gearing;

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