Under the terms of the agreement, announced on Monday, the two operator groups will share network infrastructure in the UK, Germany, Spain and Ireland for the next decade. The exact nature of the sharing differs from country to country but in the UK it entails the joint building of new base-station sites and the consolidation of existing 2G and 3G sites.
The main aim of the tie-up, according to a statement from the two operators, is cost saving. This will come from needing fewer sites and from sharing infrastructure such as masts but the operators have not yet put a more precise figure on the projected savings than "hundreds of millions of euros for both companies over the next 10 years".
Stated benefits include better quality-of-service levels for customers within currently covered areas, as well as the extension of mobile-broadband coverage to areas that are not currently well served.
The operators also said fewer mast sites meant a reduced impact on the environment and emphasised that the deal would allow them to continue to manage their mobile traffic independently.
The deal marks the second big cost-saving announcement Vodafone has made in the past week. On Wednesday, Vodafone announced it was outsourcing its network management to Ericsson. The operator said at the time that it anticipated cost savings of 25 per cent over the seven-year period of the deal.
Telefónica Europe chief executive Matthew Key said in Monday's statement: "In a fast-changing business climate, operators need to look at different ways to serve customers both now and in the future.
"This industry-leading collaboration means that Telefónica and Vodafone will continue to compete strongly against each other in local markets, while giving our customers enhanced mobile coverage in more places, using fewer mast sites."
Key went on to suggest that reducing costs in areas of Telefónica's business that customers do not see will make it possible to invest in areas they "truly value".
Vodafone Europe's chief executive, Michel Combes, also said in the statement that the deal will help Vodafone focus its resources on "developing more innovative and market-leading services while delivering on [Vodafone's] pledge to reduce the environmental impact of [its] network rollout".
A spokesperson for Vodafone told silicon.com sister site ZDNet UK on Monday that, in the UK, O2 and Vodafone will share mast sites and the masts themselves, with "the possibility of sharing antennae as well". There is currently no potential for sharing the radio access side of the infrastructure, the spokesperson added.
"The main savings are from opex – we save money on the lease and the power supply to the sites," Vodafone's spokesperson said. "If we reduce our new build [needs], we also save money from a capex perspective."
Last year, Vodafone announced a similar site-sharing deal with Orange (FTE) but that has now fallen through due to the different spectrum bands the two operators use for 2G services, Vodafone's spokesperson said. Both Vodafone and O2 use 900MHz spectrum but Orange uses 1800MHz.
"Those sites we're already sharing, we will continue to share, but we're not looking to building any more sites with them," Vodafone's spokesperson said. "There's no question of falling out – a key aim was that both sides were not able to realise the kind of savings we anticipated. We're on 900MHz and they're on 1800MHz – there wasn't a parity of site layouts."
The other two UK networks that use 1800MHz instead of 900MHz are T-Mobile (DT) and 3, who have their own network-sharing deal. Orange has not yet given any comment on speculation that it may now join that arrangement.
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