2011 Telecoms market update

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News article

2011 Telecoms market update

January 2011

2011 telecoms market update

The last two years has seen the consolidating of both mobile phone companies and sites as a means to significantly reduce operating costs and site rents. There are now approximately 60,000 mobile telecom sites in the UK.and until recently new site acquisition was largely driven by the sales success of the Apple iPhone due to its large data needs.

In December 2007, Hutchison 3G and T-Mobile developed a site share model based on RAN (Radio Access Network) sharing which enables the sharing of antenna, so no physical changes are required to enable site sharing. The companies are seeking assignment of leases into joint company names and aim to decommission 5000 sites between them - this process has already started.

Fisher German has sought Counsel’s opinion on the reasons that might be upheld to 'reasonably refuse' consent to assignment to the new joint companies. This depends on the drafting of the lease and where assignment or user is limited landlords are able to do deals which may include terms such as:
 
  • Rents towards the top end of the range
  • Premiums for assignment of between £3000 to £6000 per lease
  • Postponement of break clauses
It is important to stress that these deals illustrate that a site for two networks is more valuable than one used by a single operator.
 
Vodafone and O2 have developed a different site share model based on RAN sharing and are now also actively seeking to consolidate their respective networks. They aim through this process to decommission a further 6000 unwanted sites on top of the 5000 sites to be decommissioned by T-Mobile and H3G.
 
Letters are currently being sent to all O2 and Vodafone landlords seeking a reduction in rent paid under each lease, a change in the rent review mechanism to provide for Market Reviews only, removal of landlords break rights and the ability to be able to share the mast with either Vodafone or O2 free of charge.
 
Landlords who receive such letters should consider:
 
  • Are the demands of the operators reasonable?
  • What other option does the operator have to maintain coverage were the landlord not to agree to their demands?
Vodafone and O2 will not want to risk losing coverage.  Landlords need to consider the coverage options afforded by adjacent sites.
 
The current mergers are the biggest change in the telecoms market for 20 years and this is only compounded by the recently announced full companies merger between Orange and T-Mobile bringing about the creation of one overall parent company – 'Everything Everywhere'. This significant merger will result in further network consolidation and a significant further reduction in the number of mobile phone sites throughout the UK.
 
Despite the threatening tone of the letters being sent to landlords by the various telecom operators, Chris Hicks concludes that landlords are advised to seek to hold firm.  The market changes very quickly and landlords should be aware that 4G is next.
 
For further advice and information, please contact Christopher Hicks on 01858 411202 or email chris.hicks@fishergerman.co.uk.
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