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Profile: Matt Hatton, Analsys Mason analyst predicts merger mobile delays
21 Sep 2009 | 17.31 Europe/London
The merger of Orange and T-Mobile is almost certain to cast further doubt over the speed of mobile broadband roll-out plans and further delays are possible if 3 were also bought.
That is the conclusion of Matt Hatton, Principle Analyst at Analsys Mason. He has been looking at the current consolidation in the UK mobile market and wondering if it means the Government can keep to its 2012 target of the universal service obligation rising 2Mb, as outlined in the Digital Britain report.
Under the plans mobile is set to play a large role in bringing broadband to rural communities through the release of spectrum in the 800Mhz range freed up by television moving from analogue to digital. The spectrum is highly prized as it can travel further and penetrate inside buildings far better than the (2.1 Ghz) airwaves currently used for 3G services.
The release of this spectrum is controversial as Vodafone and O2 already have similar (900Mhz) spectrum and so Orange and T-Mobile, as well as 3, have been vocal in calls for none of the ‘digital dividend’ spectrum going to the two old boys of the industry unless they ‘refarm’ some of their 900Mhz.
Closed door delays?
The operators have spent the summer trying to iron out their differences, but the merger of two of the five players, can only lead to confusion and delay, Hatton warns.
“The government has taken a hands-off approach to spectrum negotiations to let the operators try to come up with a way of handling the 800Mhz release,” he says.
“So, it’s gone very quiet and nobody outside the five operators is getting a glimpse as to what is happening. I suspect that what will happen is that there will be no refarming of the 900Mhz that Vodafone and O2 own and the 800Mhz will be distributed to the remaining parties.”
When two become one
However, therein lies the problem, he predicts. Where there were five operators there will now be four; so long as the Orange and T-Mobile merger goes through.
“The huge question is, of course, do Orange and T-Mobile count as a single entity and so get the right to bid for one slice of released spectrum, or are they still two entities?” he says.
“The merger shouldn’t be a problem but it won’t probably be finalised for a few months and there is always the outside risk that it could be questioned by the authorities, which could lead to further delays.
“So, I can only imagine this makes negotiations quite a bit more difficult and adds a level of uncertainty.”
What about 3?
To complicate things further, Hatton points out, there is also the issue of 3. The challenger brand is a minnow in comparison to its four rivals and it is well known that it is seemingly permanently on sale, should any of those four big players chose to stump up enough cash.
It is not unknown for one merger in a market to lead to another and so there remains the possibility that 3 could be bought, further complicating the hand out of spectrum.
“I’m not sure 3 will be bought as the other operators all have the same 3G spectrum that it has, so it’s not got something they feel they need,” he says.
“However, it wouldn’t be unheard of for one big deal to follow another and there may be an argument for one of the old boys in mobile to snap up the challenger brand. I don’t think it’s likely but it’s a possibility.
“T-Mobile and 3 run their 3G networks together to gain efficiencies and so that could now mean Orange, T-Mobile and 3 end up running their 3G infrastructure under the same joint venture. So, anyone purchasing 3 would have to join this agreement or extricate 3 from it. It could be possible but it could get messy.
“The question mark over whether 3 will be bought remains, though, and it can’t help speed up spectrum allocation.”
Of course, there is always the suspicion that 3 will hang around until it is given some attractive new 800Mhz spectrum and so give it an asset which would be attractive to a suitor.
2012 could happen – just!
The one silver lining in this is that Hatton predicts mobile operators can be fairly quick to market, once they have the spectrum they need and so, although delays are inescapable, the 2012 deadline might just be met.
“We’re already behind schedule by a year for allocating a chunk of 2.6 Ghz spectrum which might not be sorted for another year and the current negotiations over 800Mhz are obviously dragging too,” he says.
“The one good thing is mobile operators can move out services quickly and the Government will almost certainly ensure any broadband services are set up to prioritise rural areas so those who need the new services most will get it first
“The current delays are not good news but I still think that the 2012 deadline is reachable, but only just.”
That is the conclusion of Matt Hatton, Principle Analyst at Analsys Mason. He has been looking at the current consolidation in the UK mobile market and wondering if it means the Government can keep to its 2012 target of the universal service obligation rising 2Mb, as outlined in the Digital Britain report.
Under the plans mobile is set to play a large role in bringing broadband to rural communities through the release of spectrum in the 800Mhz range freed up by television moving from analogue to digital. The spectrum is highly prized as it can travel further and penetrate inside buildings far better than the (2.1 Ghz) airwaves currently used for 3G services.
The release of this spectrum is controversial as Vodafone and O2 already have similar (900Mhz) spectrum and so Orange and T-Mobile, as well as 3, have been vocal in calls for none of the ‘digital dividend’ spectrum going to the two old boys of the industry unless they ‘refarm’ some of their 900Mhz.
Closed door delays?
The operators have spent the summer trying to iron out their differences, but the merger of two of the five players, can only lead to confusion and delay, Hatton warns.
“The government has taken a hands-off approach to spectrum negotiations to let the operators try to come up with a way of handling the 800Mhz release,” he says.
“So, it’s gone very quiet and nobody outside the five operators is getting a glimpse as to what is happening. I suspect that what will happen is that there will be no refarming of the 900Mhz that Vodafone and O2 own and the 800Mhz will be distributed to the remaining parties.”
When two become one
However, therein lies the problem, he predicts. Where there were five operators there will now be four; so long as the Orange and T-Mobile merger goes through.
“The huge question is, of course, do Orange and T-Mobile count as a single entity and so get the right to bid for one slice of released spectrum, or are they still two entities?” he says.
“The merger shouldn’t be a problem but it won’t probably be finalised for a few months and there is always the outside risk that it could be questioned by the authorities, which could lead to further delays.
“So, I can only imagine this makes negotiations quite a bit more difficult and adds a level of uncertainty.”
What about 3?
To complicate things further, Hatton points out, there is also the issue of 3. The challenger brand is a minnow in comparison to its four rivals and it is well known that it is seemingly permanently on sale, should any of those four big players chose to stump up enough cash.
It is not unknown for one merger in a market to lead to another and so there remains the possibility that 3 could be bought, further complicating the hand out of spectrum.
“I’m not sure 3 will be bought as the other operators all have the same 3G spectrum that it has, so it’s not got something they feel they need,” he says.
“However, it wouldn’t be unheard of for one big deal to follow another and there may be an argument for one of the old boys in mobile to snap up the challenger brand. I don’t think it’s likely but it’s a possibility.
“T-Mobile and 3 run their 3G networks together to gain efficiencies and so that could now mean Orange, T-Mobile and 3 end up running their 3G infrastructure under the same joint venture. So, anyone purchasing 3 would have to join this agreement or extricate 3 from it. It could be possible but it could get messy.
“The question mark over whether 3 will be bought remains, though, and it can’t help speed up spectrum allocation.”
Of course, there is always the suspicion that 3 will hang around until it is given some attractive new 800Mhz spectrum and so give it an asset which would be attractive to a suitor.
2012 could happen – just!
The one silver lining in this is that Hatton predicts mobile operators can be fairly quick to market, once they have the spectrum they need and so, although delays are inescapable, the 2012 deadline might just be met.
“We’re already behind schedule by a year for allocating a chunk of 2.6 Ghz spectrum which might not be sorted for another year and the current negotiations over 800Mhz are obviously dragging too,” he says.
“The one good thing is mobile operators can move out services quickly and the Government will almost certainly ensure any broadband services are set up to prioritise rural areas so those who need the new services most will get it first
“The current delays are not good news but I still think that the 2012 deadline is reachable, but only just.”