The UK telecommunications market has been very much in flux for a few years now, and today there was another twist. The UK mobile divisions of Vodafone Group (NYSE:VOD, news, filings) and Telefonica (NYSE:TEF, news, filings) have now announced their intention to formally join forces at the infrastructure level – a major redesign of their existing partnership.
Via a newly formed 50/50 joint venture, the two companies will pool their masts and backhaul connectivity into a single national grid of 18,500 sites. Vodafone will handle what they call the ‘West’, and Telefonica the ‘East’ – which also happens to include Scotland and Ireland.
The driving force here is both cost reduction for the planned buildout of LTE over the next year or two and an easier path forward to the regulatory requirement of 98% coverage by 2017. Each company will initially gain access to 40% more sites than it currently operates, with perhaps 10% being decommissioned as duplicative while the joint venture will bring more online over time to expand coverage further into more remote locations.
But unlike with Everything Everywhere, which merged the operations of T-Mobile and Orange completely, this arrangement will leave the two companies fully independent at all other levels. Each company’s actual wireless network will operate on its own independent spectrum in full competition with the other, which regulators will find more palatable.
The elephant in the room here that hasn’t been mentioned is where does Vodafone’s C&W Worldwide purchase come into the picture? While it obviously isn’t a done deal yet by any means, one of the big drivers was C&W’s national longhaul and metro fiber footprint and the possibility that Vodafone could use it to lower its backhaul costs. With Vodafone moving its backhaul connectivity into this joint venture, one wonders if the C&W fiber would go with it or not.
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