pwc_mobile network sharing_think the challenges

8/3/2019 PWC_Mobile Network Sharing_Think the Challenges

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Mobile Network Sharing

Addressing the challenges

Think PwC*

Communications

*connectedthinking


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Do your customersknow /care whosenetwork delivers a

service? Is it adifferentiator?

Market

How will yourshareholders react

to change inasset ownership?

Shareholders

How will youcharge for networksharing? Will these

be regulated?How will regulation

change as the numberof network falls?

Regulation

How will yourorganisation reactto working with a

previous enemy?Will there becost saving

redundancies?

OrganisationCEO

Agenda

Mobile Network Sharing Maximise the use of your resources

Network sharing should deliver lower costs.

How can operators overcome the significant challenges

associated with actually doing it?

Achievable BenefitsPotential Issues for Operators

For mobile operators facing intensifying market competition and mounting pressures on costs and pricing, the idea of

sharing network infrastructure with other providers brings major attractions. Today, with the focus of mobile operators

market differentiation shifting away from network coverage and towards branding and service design, network sharing is

more firmly on the agenda than ever. As well as opening the way to potential reductions in both operating and capital

costs, network sharing can help an operator focus more effectively on marketing and customer satisfaction, by reducing

the internal burden of network management. Yet, despite these attractions, successful network sharing deals remain few

and far between, and efforts to set them up remain fraught with pitfalls and barriers.

PricewaterhouseCoopers can help.

Operators networks are becoming irrelevant as a

market differentiator yet operators are traditionally

wedded to their networks. The value of their

respective contributions is therefore an emotive

issue which can have complex accounting,

regulatory and organisational consequences.

Strategic and technical rational

assessment of network sharing

Know the value of the operators

contribution

Understanding the negotiating

strengths and weaknesses

Structuring options and their

implications for future reporting,

tax and disclosure

Assessment of the potential

regulatory response

Managing organisational change

and governance

Balance between delivery and

cost savings

Structured transfer pricing

Competition concerns addressed


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Strategic drivers Objectives AssessmentRequirements

How PwC can help

1. What is the benefit ofsharing?

2. Who is the optimalpartner?

3. How will I negotiate?

4. Will the charging beregulated?

5. Will the pricingmechanism create theright incentives?

6. How will accounts beaffected?

7. Will there beredundancies?

8. Will my quality ofservice be affected?

Strategic Rationale

ValuationMethodology

Competition &Negotiation

Transfer Pricing

Regulation

Accounting &structure

Organisation impact

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Business processes,controls & KPIs

Programme and changemanagement

Business Transformation

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Pre-deal accountingpolicies assessment /technical support

Taxation advice in allphases of the deal

Accounting and Tax

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!

!

!

!

!

Technology Strategy

Partnering strategy

Vendor / sourcingstrategy

Business structure

Business planning andmodelling

Regulatory /Competition Advice

Strategy Development

BusinessCase

Valuation ofstakes andcontribution

Operationalmodel

Exit Options/future strategic

options

Competitiveresponse

Regulation

Legal structureimpact

Taximplications

Accounting/reporting

Vendor/outsourcing

strategy

Understand keyissues

Scope Analyse Implement

What are the business benefits? Will competitiveadvantage be maintained?

Has a technical proof of conceptbeen completed?

Is the partner selected the best one tohelp drive/achieve the objectives?

Can competitors combine tooutperform cost savings?

Business Case

Is there a risk of creating a bottleneck with consequentobligations to serve MVNOs?

Does this create new asymmetries betweenoperators or will the shared RAN bethe standard for all operators?

What will be the effect onMobile Termination Rates?

Regulation

What would NRAsresponse be?

Due Diligence

To what extent is the informationcontributed by the other partyconsistent/comparable?

Are there overstated assets orunderstated liabilities?

What will break the deal?

Transition and Exit

What is the people and rewardstrategy going forward and to whichbusiness does it link?

What are the leaseholdliabilities on the landto be transferred?

Is there a viable exit strategy?

How do you avoid the structure of theagreement limiting future strategic options?

Operating Model

What are the savings to beachieved in the the area of logistics

and how will this work?

How willgovernance structure

work in practice?

What are the potential savings to be achieved bycombining the purchasing power of the two

entities? How will this work?

Who provides back office systems andsupport and how are they charged?

Legal Impact

How will funding operate and what happensif one party cannot fund?

How are you going to ring fenceconfidential information and

intellectual property?

How are yougoing to manageareas of historic liabilitiese.g. environmental?

What happens if either party underperforms in itsservice provision?

What about chain liability?

Tax

What is beingtransferred? Assets,

land, goingconcern?

What are the potential models forimplementation and do they fit the

commercial requirements?

Can the equipment be dismantled?

Valuation / Accountingof Assets

Will the books and records support the accountingpolicy and reporting requirements of both parties?

How will each party gain assurance

that the fair value methodology istransparent and equitable to both parties?

Is the financial andoperational information

granular enough to identifythe assets to be transferred?

PwC can provide wide ranging support to operators across the Network

Sharing process

Our methodology is tailored to your needs: the first step in a network

sharing project is understanding the stakeholders key concerns


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Case Study

For additional information, please contact:

Our Services

Comprehensive support across the Network Sharing Deal

Data Review

Key focus areas:

Fixed assets, including AuC and inventory

Site upgrade costs

Site specific operational expenditure

Metro-layer overlay / Dark Fibre

Support and maintenance

Review data supplied by other operator to a virtual data room Reconciliation of information in the datarooms

Not a typical due diligence: competition law restrictions

Valuation

Forward-looking valuation

Synergies, and value relative to 2nd best option define range

for negotiation

Knowledge is key: understanding both sides thinking and

value drivers

Substantial range for negotiation

Network Sharing Strategy

Scope

Site

RAN

Spectrum

Core

Other scope issues

3G or 2G+3G

Femtocells

Continuity of Service

Growth vs Existing

Strategy Development

Technology Strategy

Partnering strategy

Vendor / sourcing strategy

Business structure

Business planning and modelling

Regulatory / Competition Advice

www.pwc.comThis material has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this

material without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this

material, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for

ny consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this material or for any decision based on it.

2009 PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the

ricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Business Transformation

Business processes, controls

& KPIs

Programme and change

management

Koen Hens

Partner Assurance

Communications Industry Leader

PwC Belgium

+32 2 710 72 28

[email protected]

Axel Smits

Partner Tax & Legal Services - Income Tax

TLS Communications Industry Leader

PwC Belgium

+32 3 259 31 20

[email protected]

Marc Sel

Direct Advisory IT Effectiveness

IT Security & Compliance

PwC Belgium

+32 3 259 34 10

[email protected]

Accounting and Tax

Pre-deal accounting policies

assessment / technical support

Taxation advice in all phases

of the deal

Do both have the same view about the Network Costs?

Are there other scenarios? E.g. a 2nd Best option of combining with

ANO would reduce the negotiation range.

Are all of the costs captured, and are some of these asymmetric

between the operators?

The Best option may be a combination of networks resulting in a

lower total cost.

Operator 1 Network

Own Traffic All Traffic

1.22.8 4.0

Operator 2 Network 1.33.0 4.3

CostIncrement

Room for Negotiation

Best NetworkOptional Total

Cost 4.0

Operator 1 Pays Best1.0

Worst2.8

Operator 2 Pays Worst3.0

Best1.2

Network Costs bn - Ilustrative

2G 3G

BSC RNCBSC RNC

2G 3G

Spectrum

Tower

Base Station

Backhaul

BSC/RNC

Core

pwc_mobile network sharing_think the challenges

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