Apr09

Capacity Agreements In The Telecommunication Sector

The government`s pressure on capex spending on broadband deployment (including gigabit connectivity) and securing national governance in 5G is a new impetus for change. With pandemic dependence on Internet connectivity for everything from work to study to health shopping – COVID-19 has made this pressure even more relevant, while continuing to limit CAPEX to new or expanded networks, shifting operators to improving capacity and network resilience. After the implementation of much of the digital transformation infrastructure, which we consider to be interprofessional, traditional telecommunications network operators continue to face significant changes in markets, technologies, consumer requirements and value chains. Lately, and accelerated by COVID-19 in recent months, several forces have come together to reshape the sector in a much deeper way. Gone are the days when national telecommunications markets were defined primarily by former monopoly telecommunications operators and a handful of mobile operators (MNOs). For some time now, new types of players have emerged, taking advantage of the opportunities offered by market liberalization, a competitive regulatory framework and a relaxation of licensing regimes. The views expressed in this article are not necessarily those of THEU. Similarly, “neutral” mobile phone networks are being created, mainly due to network compression requirements, particularly for 5G mmWave deployments. Small Cell Forum predicts that “by 2026, as much as 30 percent of the installed base of small cell networks from outside […] be exploited by new entrants to the mobile phone sector. While operators were busy reinventing themselves (largely without success) as technology companies, the forces described above advanced a plethora of new players.

These “new children on the block” dethrone the role of operators as infrastructure players, in particular the continued strengthening of independent tower companies that have taken over the towers assets of telecommunications companies and which, according to a BCG report, are now achieving higher shareholder returns than telecommunications companies, as well as positive reactions from financial markets. According to FT, the fast-growing European tower company Cellnex is currently experiencing a share price change comparable to that of Big Tech. Finally, spectrum allocations to company users are being abolished as a benefit to telecommunications offerings and operators are open to increasing competition from the networks and system integrators they use themselves, with the Small Cell Forum providing a 71% share of domestic business systems for newcomers. Another trend is the rapid growth of fibre-only suppliers, which are also known as “Altnets” and are increasingly powered by private equity. The most recent examples are the investment and development of Community Fiber and CityFibre in the UK, as well as German fibre optics in Germany. In addition, open-access wholesale fibre is developing as a model, with the potential to limit dual investment and increase economies of scale while contributing to the government`s universal broadband goals. Third, a changing financial landscape, marked by the numerous stimulus packages (which have in fact never stopped since the Great Recession), the fact that there is more money available for investment or credit and that interest rates are lowered, which, especially in the face of considerable economic uncertainty, generates a huge demand for assets that promise stable returns – the infrastructure layers of the telecommunications industry fit well into this bill.

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