Understanding Carved-out Mobile TowerCo Asset Company Related Incentives for Cost Efficient 5G Rollout and Operation in the EU

Abstract

EU mobile telco industry faces to lacking economies of scale, asset utilization and efficiency that widen the investment GAP to reach EU Digital Decade 2030 target for full mobile broadband internet coverage. Operators request market consolidation (merger & acquisition) or at least market cooperation (mobile network sharing) to address challenge, however it is not well received by regulators, preferring infrastructure based competition over service based one. Therefore, operators are incentivized to look for efficiency improvement alternatives, like strategic asset reconfiguration, as network carve out into infrastructure, e.g. mobile tower companies (TowerCos).
The aim of this paper to contribute to the understanding of TowerCo related incentives for efficiency improvement. The research question focused on addressing to what extant does TowerCo carve-out stimulate the cost efficient 5G rollout and operation in the EU. The research draws a theoretical model framework in which cases study scenarios are assessed with qualitative analysis. The research finding and the novelty is that TowerCo divestiture under common case concentrated incumbent operator market, limited virtual or new entrant operators, mainly operator-wing captive TowerCos, and matured network rollout stage, is less incentivizing the efficiency driven basestation consolidation, compared to a network sharing. Nevertheless, on competitive markets with viable virtual operators, being incentivized to become full-scale operator, independent neutral host TowerCos and/or growing network rollout stage, TowerCos lowering entry barriers in value-chain and rollout unit costs, therefore positively contribute to more efficient 5G rollout.

Keywords: TowerCo, network sharing, cost efficiency, 5G, open RAN

JEL Classification: G34, K21, L11, L24, L25, L41, L51, L86