What does the new Telefónica-TIM infra-sharing deal mean?

Telefónica’s Brazilian subsidiary Vivo and Telecom Italia's TIM have signed a memorandum of understanding to expand the sharing of telecom infrastructure.

The initiative is seen as a way to streamline capex allocation and reduce costs. Spain's Telefónica has similar partnerships in other markets where it operates.

In the MOU, the two carriers agreed to share 2G networks on a nationwide basis and 700MHz 4G networks in localities with fewer than 30,000 residents, which will be gradually expanded over time to larger municipalities.

Renato Pasquini, telecom analyst at Frost&Sullivan, says the move was important to provide some financial sustainability to 2G, which is an essential network for M2M connections. 

“Most POS and card machines would not work without this network operating,” Pasquini told BNamericas.

Brazil has thousands of small localities that are served by only one operator.

In addition to the infrastructure sharing, opportunities will be evaluated for efficiencies and cost reductions in operations and maintenance, such as electricity and site rentals, the companies said in a joint statement on Tuesday.

The two telcos will also assess network-sharing opportunities in other technologies. 

Brazil will auction the first bands for 5G next year and there is a consensus among experts that the technology will require more antennas than previous technologies.

"With the 5G launch [at various frequencies] approaching, and the expanding LPWAN [IoT] coverage, it no longer makes sense to maintain a lot of lagged technologies in overlapping networks," Pasquini said.

The analyst also highlighted the TIM-Vivo option for a "single grid" sharing model, which is basically the sharing of all infrastructure.

To the telcos, sharing is mainly an opportunity to free up capex for where it is most needed.

“At a time when demand for data is growing exponentially, we're looking for a significant improvement in customer experience, as well as reallocating resources to new technologies such as 4G, 4.5G and fiber,” Vivo CEO Christian Gebara said in the joint statement.

"Infrastructure sharing is a crucial industry solution for the development of telecommunications in the country. This agreement represents an efficient initiative that increases the speed of network deployment, reducing the level of costs and impacts,” TIM president Pietro Labriola added.

The specific terms and value of the deal were not disclosed.

The companies said they will jointly provide details of the sharing plan over the next 90 days before submitting it for approval by authorities.

This is not the first time the two companies have agreed to share networks. Last year, TIM and Vivo expanded a deal to share 3G infrastructure in more than 570 Brazilian municipalities. They also reached a deal to share 450MHz in rural areas.

TIM also shares 3G networks in 700 municipalities with Claro and voice, data and SMS in 3G and 4G in 800 localities with Oi.

Oi and TIM already had an infrastructure sharing agreement for core network and spectrum in the 2.5GHz (4G) and 1.8GHz bands.

Vivo also shares parts of its network with Claro. 

According to telcos association Telebrasil, Brazil had nearly 95,000 cellular antennas installed in May, a number considered insufficient considering the country's vast size.

São Paulo is the state with the most antennas, at nearly 24,000. Vivo and TIM are the leaders with 25.1% and 21.7% of sites in the state, respectively.

Vivo and TIM were already leaders in the number of municipalities covered in Brazil, and should further consolidate their leadership with this initiative. 

In the opinion of Pasquini, the partnership is not anti-competitive as it is not a market concentration. “The two will continue to compete with each other and with the other players.”

Vivo provided 32.2% of all mobile lines in service in Brazil at end-May, followed by Claro with 24.7% and TIM with 24.2%, according to data from regulator Anatel.