Optus, Vodafone seal 3G network sharing deal

Following a heads of agreement announced in August, Optus and Vodafone said they were the first mobile operators in Australia to finalise an agreement to build and operate a joint national 3G radio network, sharing more than 2,000 base stations nationally.

The move underlines the increasing competitiveness of the 3G market, with Hutchison already operating a service and Telstra planning to have its network up and running by July 2005.

The telecommunications heavyweight is finalising an agreement to share Hutchison's network in an AU$450 million deal.

Allen Lew, managing director, Optus Mobile said the Optus-Vodafone agreement was expected to significantly reduce network cost.

"By bringing together the resources of the Optus and Vodafone teams, we are able to share the costs of the network enabling us to roll out faster and deliver efficiencies to both our businesses," he said.

Lew added they are planning to launch the network in the third quarter of 2005. He also announced that they have already finalised the radio plan and has started constructing the network.

Grahame Maher, the chief executive officer of Vodafone Australia said both companies will roll out a network of 3G sites, initially in Sydney, Melbourne and Canberra followed by Brisbane, Perth, Adelaide and other regions.

Maher added that the joint venture will "minimise community and environmental impacts" since they will be re-using existing sites from the combined pool of existing Optus and Vodafone 2G sites. Maher said only 20 percent of the 2,000 base stations will be new, decreasing the number of greenfield sites required.

Andrew Smith has been appointed as chief operating officer to lead the newly created joint venture executive team. Smith will be stepping down from his current position of director for mobile networks at Optus.

The agreement to share network infrastructure encompasses both co-located sites and shared network sites. The network installed on shared sites is to be held through an unincorporated joint venture between the parties.

A co-located site is where Optus and Vodafone share a single set of 3G antennas and feeders and co-locate the two carriers' 3G base stations in a single equipment shelter. This type of site will be deployed in the inner areas of Sydney and Melbourne.

Shared network sites use a single set of 3G antennas and feeders and share a 3G base station.

Lew announced that both Optus and Vodafone will each own a 50 percent interest in the assets, have access to 50 percent of the capacity and share the cost of building and operating the network.

He added that both carriers will need AU$300 to AU$350 million each for a 50 percent share for the joint venture, which will amount to around AU$600 million to AU$700 million.

Nokia will provide the 3G Radio Access Network equipment as well as provide project management services to the project office of the joint venture. Nokia will also be providing the Multi-Operator Radio Access Network (MO-RAN) technology to enable the sharing of 3G base stations by the two independent operators.

Optus estimates the cost of independently rolling out 2,000 3G base stations to cover Sydney, Melbourne, Canberra, Brisbane, Perth and Adelaide to be approximately AU$435 million. Under the joint venture, Optus estimates its capital expenditure will be reduced by AU$100 million in the first three years, compared to a "do it alone" approach.

Operating expenditure for maintenance, operations and site leases is expected to be reduced by approximately AU$10 million per year.

Both parties clarified that the alliance only deals with the radio access network. Each participant retains complete independence in relation to applications and services, content, handset procurement, pricing, marketing, management of customers such as billing and customer service. The agreement also has no impact on current wholesale arrangements as each party is free to wholesale to any entity.

Maher announced they are planning to copy the same joint venture in other parts of the world, starting with Sweden. Both parties are currently waiting for final approval by the Australian Competition and Consumer Commission (ACCC).