A week in telecoms: A merger, the metaverse, and funding Europe's networks

Welcome to the Inform weekly news round-up, where we take a look at a selection of recent news and how it impacts CSPs in their digital transformation journeys.

Four to become three in the UK

Vodafone and Three finally made the much-anticipated announcement that they plan to merge their operations in the UK to create what would be the market’s largest mobile operator. Although some regulators oppose efforts to reduce the number of in-market CSPs from four to three, Vodafone UK and Three UK have indicated that the merger is key to their survival in an increasingly competitive environment.

The merger is of course still subject to approval by the Competition and Markets Authority (CMA), but if it is given the green light then Vodafone would own 51% of the combined entity — currently called MergeCo — and CK Hutchison the remaining 49%. Vodafone UK CEO Ahmed Essam will become CEO and current Three UK CFO Darren Purkis will take the role of CFO.

The CSPs have also outlined a £11 billion network investment plan to allay regulatory concerns.

As noted by CCS Insight analyst Kester Mann, the deal “makes plenty of sense as both providers are sub-scale. As separate entities, it would have been near impossible for either to grow enough organically to come close to challenging BT or Virgin Media O2 for size. Inevitably however, there will be widespread fears over job cuts.”

Mann adds: “My view is that the deal should be approved. It is better to have three strong providers than two that are dominant and two that are sub-scale. Blocking it could thwart the long-term development of the UK’s telecoms infrastructure.”

European Parliament backs CSPs in fair share debate

On 13 June, the European Parliament voted in favour of the Competition Policy Report. Among various measures, the report calls for a policy framework where “large traffic generators” contribute fairly to the adequate funding of telecom networks without prejudice to net neutrality.

In other words, the European Parliament appears sympathetic towards calls by CSPs for certain big tech companies to pay their “fair share” towards the future development of CSP networks.

The vote was immediately seized on by Carlos Rodríguez Cocina, Director for EU Affairs and Head of Brussels Office at Telefónica, which has been one of the more vocal supporters of the drive to ensure large traffic generators help fund networks through a kind of “telco tax”.

“The large backing by European parliamentarians for such a framework expresses a clear mandate to address and mitigate persistent asymmetries in bargaining power between LTGs and telecom operators and to re-establish a fair balance in the value chain,” Rodríguez said.

Large traffic generators such as Netflix oppose any move to impose a telco tax, as you would expect. EU industry chief Thierry Breton has also previously indicated that he is taking an open-minded approach to the issue of “fair share”, or who should fund the rollout of 5G and broadband networks in future. This debate is no doubt set to continue for some time yet.

Nokia and EY put favorable spin on the metaverse

Discussions about the metaverse are not always positive, with some not entirely sure what it will be nor how it will be monetized. However, a recent study by Nokia and EY provided food for thought, suggesting that certain enterprise and industrial metaverse use cases are already proving to be successful.

The metaverse at work study surveyed 860 business leaders across six countries and claims to show that “the industrial metaverse, particularly, is expected to deliver on and beyond expectations.”

According to the study, companies that have already deployed industrial metaverse use cases are seeing more reported benefits than those still in the planning phase expect, most notably in capital expenditure reduction (15%), sustainability (10%) and safety improvement (9%).

The study also found that only 2% of respondents see the metaverse as a buzzword or a fad, while 58% of companies with future metaverse plans have already deployed or piloted at least one metaverse-related use case. Nearly all (94%) of those who have yet to begin their metaverse journey plan to do so in the next two years.

In terms of geography, the US (65%), UK (64%) and Brazil (63%) are currently leading the way when it comes to having deployed or piloted at least one industrial or enterprise metaverse use case. When asked which use cases they most expect to deliver transformative value, enterprises saw the highest potential in the use of extended reality for training to onboard and upskill the workforce, while three out of the four industries surveyed chose the use of virtual R&D to enhance product design and processes.

Telefónica, ARME form facility for mobile robotics 

Telefónica Tech, which focuses on cloud, IoT, big data, AI, blockchain and cyber security services at the Spanish group, has joined forces with the Spanish Mobile Robotics Association (ARME) to focus on, you guessed it, the development of solutions in the mobile robotics field.

The partners have created a mobile robotics technology hub at The ThinX, Telefónica Tech’s IoT and big data applied technology laboratory. The aim is to allow businesses to test robotic simulations in real conditions before their wider implementation.

It seems that Spain has big ambitions for the mobile robotics field. As outlined by Javier Miguélez, President of ARME, the hub “will generate more and better technological developments in our country. It will also attract foreign companies, promoting employment in a key sector for our future.”

ARME is made up of mobile robotics component or software suppliers, mobile robot manufacturers and mobile robotics consultancies with at least 51% Spanish capital. Its vision is to make Spain the world leader in mobile robotics and it expects the sector to have a compound annual growth rate of more than 10% over the next five years.

Germany steams ahead with 5G rail project

Ericsson, Telefónica Deutschland and Vodafone’s Vantage Towers are working with national railway operator Deutsche Bahn to come up with ways of ensuring better 5G connectivity alongside Germany’s railways.

The partly state-funded project, Gigabit Innovation Track or GINT, comes with €6.4 million in government funding and runs to the end of 2024. The partners will also provide similar levels of funding.

According to the Federal Ministry of Transport and Digital Infrastructure (BMDV), those involved will jointly examine “technical solution concepts” along with proposing “legal and regulatory framework and business models.”

The provision of decent 4G and 5G coverage along railway lines has long been a challenge for CSPs. In Germany, 5G spectrum licensing conditions from 2019 included minimum data rates of 100 Mbps by the end of 2022 along all federal highways, all main roads and along the major railway routes.

At the end of 2024, 5G coverage should be extended to seaports, main waterways and all other road and rail routes in the country.

Dish Networks reaches 70% 5G network coverage

US-based Dish Networks is, along with Japan’s Rakuten Mobile and 1&1 in Germany, part of a small cohort of operators building a new mobile network based entirely on open RAN and cloud native principles. However, the operator has been struggling financially, and is under pressure to meet targets under its 2019 agreement with T-Mobile US and the US Department of Justice (DoJ) that paved the way for T-Mobile to buy Sprint. Dish was nevertheless able to announce some good news this week: it met its requirement to cover over 70% of the US population — some 240 million people — with its 5G network in June 2023. According to Dish, it has launched over 15,000 5G sites and also now provides its voice over new radio (VoNR) service to over 70 million people. However, its next target – covering 75% of each of its spectrum license areas with 5G, by June 2025 – is expected to be much harder to achieve.