Demand for fast networks forces telcos to team up

Telecom operators, once bitter rivals for customers, are finding that they need to team up to pay for expensive networks as demand for better and faster mobile connections goes through the roof.

Such alliances, which could also spark new M&A activity in Europe, are required for the expensive rollout of mobile connections that allow users to access social networking sites, email and other data-heavy applications.

"You're going to see more consolidation, you're going to see more mergers and acquisitions, you're going to see less operators in three years' time," said Margaret Rice-Jones, chief executive of Aircom, an independent provider of network management tools and services.

Many incumbent telecom groups, who in the past spent billions to buy 3G licenses, are not ready to serve customers with high-speed mobile data technology, needed by a growing number of users of smartphones and 3G cards or sticks that allow people to get online via the mobile network from anywhere.

STRENGTH IN NUMBERS

Telecom groups have so far not seen the need to invest heavily in capacity because their business models are still generating cash.

The mobile Internet market has boomed since the 2007 introduction of Apple Incorporation's iPhone and data traffic over the internet is doubling every six months globally and growing even more rapidly in some countries.

While market research firm iSuppli estimates global annual shipments of smartphone handsets are projected to increase to 450 million in 2013 from nearly 200 million in 2009, mobile data traffic at the moment is already putting unprecedented stress on networks.

Telecom operators will have to spend billions of euros for network expansion and the rollout of new technologies such as High Speed Downlink Packet Access (HSPA) and Long Term Evolution (LTE).

LTE is the fourth generation of mobile broadband, which utilises HSPA mobile broadband infrastructure currently being rolled out.

According to Aircom, a carrier in the United States has to invest about USD 1.8 billion in the first year to roll out LTE, while a European competitor will have to spend about USD 880 million.

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