Connected Research

Union policy research in the 21st century

Posts Tagged ‘3 UK

everything, everywhere

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So, it’s not going to be T-Orange after all, then. T-Mobile and Orange have resisted the temptation of the obvious and have decided to run in a completely different direction, calling their joint venture everything, everywhere – perhaps a slightly hyperbolic name for a mobile company, even if it is the largest one in the UK, and one which appears something of a mouthful in comparison to the available competition (it has more syllables than the three other network operators put together).

Its ‘vision’ includes a single ‘super-network’ giving ‘unsurpassed coverage and capacity’ for customers (though 3 might take issue with this bit), and at a lesser impact on the environment. Few details are as yet available other than that the company will seek to combine both the Orange and T-Mobile networks and, by cutting out duplication, reduce the number of stations and sites that the company uses (which currently stand at some 27,000). Nevertheless, how this network looks, and operates, is a vitally important consideration not least given the terms on which the JV was approved (i.e. the guarantees given to 3; and the sale of spectrum). The company has, however, confirmed that all four of the companies served by the network (including both 3 and Virgin Mobile) will run on a common infrastructure.

The new company claims a customer base of more than 30 million people – ‘over half of the UK adult population’ (I can’t recall the companies trumpeting this sort of statistic while the regulators were looking at the proposed JV: funny, that!) and its press release helpfully breaks these down into pre-paid and contract mobile customers and Orange’s fixed network (the management of which was outsourced last month to BT) – so would seem to incorporate the potential for some double-counting.

The merged company will have 16,500 employees – 2,500 fewer than they had when the JV was announced seven months ago – and is, according to the same report, seeking savings of some £3.5bn by 2014 in shared infrastructure, technology and in the savings resulting from job cuts.

Not everything, everywhere for everyone, then.


Written by Calvin

12/05/2010 at 11:21 pm

T-Orange to build afresh?

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Concluding the week with some news which has only just come to light, it’s been rumoured that T-Orange, which said today that it had successfully completed its joint venture following regulatory approvals earlier this week, and which may – or may not – be about to re-brand itself TOM, is considering building a brand new network for itself.

T-Mobile is thought to have been discussing with its network build partners, Nokia Siemens and Huawei, building out new base stations right across its spectrum coverage, from 900MHz to 2.6GHz. This would enable it to offer seamless services across different frequencies and regardless of the type of handset being used by the consumer, as well as improved capacity based on a network offering greater speed and efficiency and, therefore, a more attractive consumer prospect. Building a new network from scratch means offering such potential to consumers earlier than rival operators, providing a commercial boost to the JV, while others have also commented that building a new network is, in cost terms, likely anyway to be no more expensive than T-Mobile integrating its network with that of Orange – itself likely to be a significant project – since new technologies have emerged which allow base stations to be built on the basis of low power and which are, therefore, both cheap and, presumably, energy efficient.

These are all important considerations not least on top of last week’s news from Ericsson that the 400m mobile broadband subscriptions now generate more network traffic than 4.6bn mobile subscriptions [registration required; limited viewing time]. Worldwide data traffic has surged by 280% in each of these last two years, clearly putting immense and increasing pressure on mobile network capacity as well as on capital expenditure resources, since data revenues are not expected to surpass mobile revenues anywhere in the world until 2014 (when Japan is likely to be the first).

It’s just a rumour – and indeed, the reports suggest that Orange was somewhat of a cooler partner to the idea. If true, however, its significance will lie in two things. Firstly, from a trade union perspective, such an activity would see the creation of network build jobs during 2012-2014 once the JV has decided its strategy as a single operator – a welcome boost on top of what is likely to be job losses as the operators seek to realise efficiency gains of £3.5bn in network operation and capital expenditure savings, as well as other synergies. As the reports suggest, the move towards higher frequency services is likely to mean extensive network re-builds for other operators so there may well be knock-on effects on network build jobs in other areas, too.

Secondly, it should be recalled that one of the reasons that the Office of Fair Trading withdrew its opposition to the JV was the agreement reached with 3 UK over access to the JV’s network. It is to be hoped from a regulatory and competition perspective that this agreement was watertight as regards any new network instigated by the JV, and did not confine itself to access to existing base stations. These pages have argued previously that public competition policy was, as a result of this private agreement, essentially made subject to an arrangement which was not open to public scrutiny, while commentators at the time suggested that a focus on one or other network of the merged entity may well be to the detriment of maintenance investment in the other, and to any commercial agreements reliant on the other network. Such suggestions may well come true if the agreement is not ‘future proofed’ as regards access by 3 UK to any future networks the JV builds out jointly.

Written by Calvin

01/04/2010 at 5:56 pm

Mobile market share – the state of competition

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This continues to be one of the most enduring posts on this blog, but it is now a little out of date. You can find the full original post below, but you might like to know that I have also updated the figures in a slightly different context than the T-Mobile/Orange JV, and re-located them in a couple of posts on a separate blog which you can find at:

or (slightly earlier) here:



And the original post commences here:

Yesterday’s press release by France Telecom and Deutsche Telekom about the approval for the merger of their UK subsidiaries highlighted an interesting snippet of information concerning the JV: that it would serve 29.5m customers.

On the presumption that this is the existing customer base of the merged JV, how does this relate to market share? We have been repeatedly told that the market share of Orange and T-Mobile in the UK is 37% – thus indicating a total mobile customer base in the UK of just less than 80 million. This is, more or less, in touch with Ofcom’s estimate that there are 126.1 active mobile connections per 100 population (Figure 4.1), given a UK population of 61m. That would indicate about 77.4m mobile subscriptions (and, indeed, a market share for T-Orange of about 38%).

The most recent Ofcom quarterly figures, published last month for Q3 2009, are, however, likely to provide a more accurate and reliable figure. These show a total subscriber base for the big 4 (i.e. excluding 3 UK) of 69.2m (Mobile telecoms market data, Table 4). We’d probably now need to add about 5.2m for 3 UK, on the basis of it at least matching its 2008 growth rate in 2009 (Figure 4.42). These figures exclude the customers of mobile virtual network operators (such as Tesco Mobile, which uses O2) for Vodafone, O2 and Orange (but presumably, therefore, they include those for Virgin Mobile in the T-Mobile stats). According to the most recent quarterly accounts for Virgin Media (Customer Segment>mobile), Virgin Mobile has around 3.232m customers. Taking these off the Ofcom numbers, to give a comparable figure for all the operators based on direct subscriptions rather than those encompassing virtual operators, gives the following indicative market shares, by number of subscribers:

Interestingly, the number of T-Mobile and Orange customers on this basis totals exactly the figure in the companies’ press release – 29.5m. Yet, the market share on this basis is not 37% – but 42%. Including Virgin Mobile subscribers in the T-Orange total, and adding a Tesco Mobile subscriber base of 2m (Retailing Services>Tesco telecoms), the market share of those on the T-Orange network climbs a little, to about 43%. This excludes virtual operators on the Orange and the Vodafone networks, but these are likely to have only a small market share (and, in Orange’s case, would further concentrate the numbers). Not really within an acceptable margin of error, that.

Now that the merger has been approved, these are figures that will need to be closely monitored in order to examine the effectiveness of the ‘remedies’ that address the competition aspects of the JV. Nevertheless, there would appear to be little urgency for this – the merger may proceed ‘by the spring’, but the auction of additional spectrum in the 1800MHz band which has been made a condition of approval for the JV need not take place until the end of 2011 while the spectrum itself does not have to be cleared for use by the winners in that process until 2013 in one case and 2015 in the other. In order to show a bit of good faith, given the fast track approval the JV has received, the parent companies might want to look at facilitating an earlier release than that.

Written by Calvin

02/03/2010 at 4:09 pm

T-Orange in the pink – but unresolved issues remain

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The European Commission has today approved the joint venture between T-Mobile and Orange in the UK. The outcome had been heavily trailed in press speculation last weekend, and the concessions appear to be in line with what the papers were then discussing, i.e:

– specific protection for 3 UK regarding its own network joint venture with T-Mobile

– T-Mobile and Orange to give up 25% of their jointly held spectrum in the 1800 MHz band

Today was the last day, according to the European Commission procedure, for the decision to be made and, as a result, the Office of Fair Trading has also today withdrawn its request that the merger be referred to it.

The questions that remain appear to me to be as follows:

1. The Commission decision talks of the arrangements with 3 UK being necessary ‘to ensure that there remain sufficient competitors in the market’. If four is now ‘enough’, why has competition policy been geared towards establishing and maintaining a fifth operator in the market – not least in the light of the influence this requirement for an additional market entrant had on the auction for 3G spectrum in 2000 (and on the subsequent fall-out)? And what should happen in the light of four operators now being a ‘sufficient’ number were Vodafone to decide it wants to merge with 3 UK, as the two smallest operators in the UK market, as happened in Australia last June? [Edit 5 March: One analyst has already commented that such a deal would, in the wake of the T-Orange JV, be ‘competitively appropriate‘.]

2. According to the press speculation, 3 UK signed a deal with T-Mobile and Orange giving it access to 3,000 more sites to support its own network expansion. Part of the OFT’s fears of the impact of the merger on 3 were that it could end up facing severe jeopardy if T-Mobile and Orange were to switch customers on to the Orange network, running down maintenance on the T-Mobile network, allowing it to atrophy and thus undermining the critical quality component (para.67). With the greatest of respect to 3’s negotiators (and of course to commercial confidence), how do we know that the additional 3,000 T-Mobile and Orange sites to which it has just secured access will continue to be ‘viable’ ones into the future (i.e. that the OFT’s fears won’t end up being realised)?

3. The European Commission correctly points out that it is contiguous spectrum across frequency bands which offers the key to early implementation of LTE (so-called 4G) services. With it, T-Orange is in a clearly advantageous – a market leading, in fact – position. The concession of the 15MHz of spectrum that T-Orange has offered must, therefore, be done in such a way as to ensure that, afterwards, there is no such contiguous position (note here that the JV appears not to have had to go further than its initial offer, according to the press speculation). This could easily be achieved were the 15MHz of spectrum conceded to be that of one of the operators alone rather than from them both. It is clearly imaginable that point (2) above is also very much tied in with this.

4. Both the EC and the OFT press release contain clearly jointly-worded statements on the concessions doing enough to satisfy on the impact of the JV on competition. Even a cursory glance at the OFT’s request indicates that this was not the only (though of course it was the primary) concern: issues of subsidiarity also featured, for example. Other question marks around the approach to regulatory decision-making highlighted previously on these pages are also important.

And, finally – something may have been lost in the translation, but the competition issues are not yet ‘resolved’, in the words of Competition Commissioner Almunia: please note that crucial decisions and actions have to be taken before that can be proclaimed.

Written by Calvin

01/03/2010 at 4:21 pm

Spectrum issues and the T-Orange JV

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The Financial Times reported this week that O2 and 3 have told the European Commission that it is the UK authorities that are best placed to review the T-Orange joint venture, while Vodafone has also publicly commented on its view that the UK authorities are keen to review the spectrum aspects of the merger, an issue to which O2 also points.

These pages have declared their view on these issues already – it should be investigated in the UK, as the joint venture affects only the UK market and there are thus strong subsidiarity-related reasons why the EU should choose not to get involved – but the most interesting part of the FT‘s story is the bit relating to spectrum allocations.

Last summer’s report by the Independent Spectrum Broker included a useful chart documenting existing spectrum allocations, which I have reproduced below:

Vodafone and O2, as the two earliest operators from the mid 1980s, have some frequencies at the 1800 MHz level but frequencies here are otherwise dominated by T-Mobile and Orange, which appeared on the scene in the early 1990s. Vodafone and O2 have the only spectrum awarded at the 900MHz level while frequencies at 2.1 Ghz are the ones allocated for 3G services, which is where 3 comes in – it has none of the lower frequencies allocated earlier.

The key to understanding spectrum issues is that lower frequencies (like 900 Mhz) lend themselves well to quick network roll out because they cover longer distances, and thus requires less infrastructure (base stations and masts), and because their signals penetrate buildings better than those at higher frequencies (like 1800 MHz), which require more infrastructure and which are better suited to providing capacity in denser populated, urban areas. The less good penetration of signals at higher frequencies is the reason why 3G services are, in principal, suitable for mobile services outdoors and are much less suited to fixed installations inside buildings.

Ensuring a more even allocation of frequencies was the aim of Kip Meek, the Independent Spectrum Broker, on the grounds that allowing operators to trade frequencies between them would allow them all to choose the combination of spectrum that best suited their needs and which, as a result, would improve services (and access speeds). By ending the legal challenges by operators over policy on 2.6GHz frequencies (best suited for so-called 4G services), it would allow Ofcom to catch up with European counterparts on allocation.

The dominance of the T-Orange JV at the 1800 MHz level, and thus its ability to dictate the terms of spectrum trading between the operators, is the reason why the argument has been raised that the JV should concede 1800 MHz spectrum. Without necessarily going too far down that road, it is easy to see why the JV would blow apart the work done by the Independent Spectrum Broker in reaching his conclusions on spectrum trading. It thus becomes easier to see why it is the UK authorities that need to investigate this proposed JV: these are issues that properly concern the UK, not the EU.

Written by Calvin

08/01/2010 at 12:44 pm