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Phone Companies Decide They Can Not Face 5G Spending Burden Alone

Phone companies are calling a partial truce in the battle to deliver fifth-generation wireless networks so they can help each other build the infrastructure without breaking their finances.

Carriers from Vodafone Group Plc to Telecom Italia SpA and Telefonica SA have signaled they’re ready to share more of their phone masts, equipment, and network capacity to avoid duplication and make scarce resources go further.

As companies gear up for 5G spectrum auctions this year that will fire the starting gun on the new networks, Vodafone CEO Nick Read told delegates at the mobile industry’s biggest annual gathering in Barcelona that it still had a protectionist mindset.

Vodafone “will do more sharing going forward” with other telecom companies, Read said on stage at the Moblie World Congress (MWC) fair in Barcelona, Spain. The industry did not collaborate enough, he said, and needs to “win back trust from the customer.”

U.K.-based Vodafone showed it was ready to work with some big rivals on 5G last week, teaming up with Telecom Italia to study ways to get the technology to market sooner and at a lower cost. They may even merge their telecom towers into a single business. Read, who has been seeking tower deals to pay down debt, last month announced a boost to Vodafone’s tower-sharing deal in the U.K. with Telefonica.

Telefonica CEO Jose Maria Alvarez-Pallete told Bloomberg TV on Monday he was open to more alliances that “would make economic and rational sense.’’

The comments suggest more such deals are on the way as companies progress towards 5G, which is needed to handle surging data demand and connect factories, cars, and homes in a so-called “Internet of Things.”

Network Overlap

While phone companies often share some network investment, the flurry of collaboration ahead of 5G signals a relatively new stance for an industry whose players always saw the speed and coverage of their separate networks as a commercial advantage. By creating more interdependent and overlapping networks, the risk is that each will find it harder to differentiate their offering.

Cost is now a crucial factor, however, with the European industry suffering from stagnant sales and four years of falling share prices amid a fierce battle for market share. Carriers around the world need to “collaborate even more” on technologies such as 5G and data security, Deutsche Telekom AG Board Member Claudia Nemat told reporters in Barcelona.

Read said Vodafone could also share development of the fiber cables that connect telecom towers and partner on building radio equipment outside urban areas.

The spirit of collaboration in Barcelona reached beyond telecoms, with Telefonica teaming up with Microsoft Corp. to develop services using Microsoft’s Azure artificial intelligence platform.

Executives at the event spent less time than usual criticizing governments: the industry has railed at them for taking billions of euros in spectrum fees and blocking mergers that could ease tough competition. With governments threatening to ban one of their biggest suppliers, Huawei Technologies Co., over security concerns, it may be the wrong time to attack policymakers.

Orange SA CEO Stephane Richard reserved more criticism for the industry itself, saying companies are seen as unable to deliver disruptive technologies and must be more creative.

The telecom industry has had a “lousy reputation,” for appearing to be “working more for shareholders” than for customers, but this is changing, said Richard.―Fortune

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