Wireless Network Sharing, Canadian Style

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TELUS (NYSE: TU) and BCE (NYSE: BCE) are promoting their national wireless brands without building dedicated infrastructure across Canada through a multi-layer network sharing arrangement. Such a deal may be a precursor to building and managing wireless infrastructure in future.

The two companies are similar in size and scale though their respective power bases are at opposite ends of the country.

Headquartered in Vancouver, British Columbia, TELUS provides triple-play wireline services to 5.0 million subscribers, mostly in British Columbia and Alberta in the west, and in eastern Québec along with 10.4 million national postpaid and prepaid mobile phone subscriptions and connected devices.

TELUS’ 2Q20 wireless service revenues were $1.1 billion, down 3 percent YtY from $1.2 billion in 2Q19. This downturn was expected as roaming revenues are down due to COVID-19 isolation.

TELUS invested $325 million in wireless capital expenditures in 1H20, up 7 percent over 1H19 for 4G LTE Advanced expansion and new 5G deployments. The company projects 2020 wireless capex of about $685 million.

BCE (formerly Bell Canada Enterprises) is a Montréal, Québec-based wireline, wireless and media conglomerate. BCE’s operating territory stretches from the Maritime provinces in the east, through Quebec and Ontario in central Canada to Manitoba in the midwest and into Canada’s northern regions.

At the end of 2Q20, Bell Wireline has 8.9 million triple-play subscribers and Bell Wireless has 10.0 million post- and pre-paid subscribers nationwide.

Through 1H20, Bell Wireless’ service revenues were $2.3 billion, down 3 percent on a year-to-year basis, reflecting COVID-19’s impacts on work environments and travel patterns.

Wireless capex in 1H20 was $237 million or 19 percent of total capex, up 2 percent from $233 million in 1H19. Bell Wireless’ 2020 capex will be around $500 million.

Herein lies the network investment contradiction.

Through 1H20, wireless accounted for 30 percent of TELUS’s total capex but 50 percent of consolidated revenues. In Bell’s case, wireless was 19 percent of the total capex and contributed 38 percent of total revenues. Wireless capital intensity for both companies is less than 15 percent.

TELUS and Bell achieve their out-of-region coverage through a reciprocal network sharing agreement referred to as multi-operator core network (MOCN). Basically, both companies share their radio access network but operate their own network cores.

More than just co-locating on the same tower or sharing backhaul facilities, network sharing gives customers of either company access to the same antennas and eNodeB base stations at each cell site in their respective networks.

The two companies share their 3G and 4G RANs in different parts of Canada. TELUS builds cell sites in British Columbia, Alberta, Manitoba, in Windsor, Toronto and Ottawa in Ontario, and in Montréal, Québec City and the Gaspé Peninsula in Québec. 

Bell builds out its network from the eastern part of Canada to the midwest except for Saskatchewan, where SaskTel owns the RAN that it shares with both companies. Bell also has some cell sites in British Columbia, mainly in Vancouver.

This way Bell customers in Vancouver use TELUS’ RAN. In major easten cities like Toronto, TELUS customers use Bell’s network.

Such an arrangement is feasible because both companies share all Canadian 3G and 4G LTE licensed frequencies except 2.3 GHz that only TELUS uses.

The companies operate independent EPC and IMS core networks that authenticate user SIM cards, track usage and billing, complete calls, deliver text messages, and connect data sessions to the Internet.

Even without a contiguous national network, MOCN allows each company to claim their 4G LTE Advanced services cover over 95 percent of Canada’s 37 million people.

TELUS and Bell are building 5G on that same footprint with Ericsson, Nokia and Samsung supplying the same equipment to both networks. 

The two companies launched 5G in early June in the same major cities – Montreal, the Greater Toronto Area, Calgary, Edmonton, and Vancouver with planned expansion to 26 additional markets in 2020.

By sharing their RAN, each company promotes nationwide wireless services while spending much less than what it would take to construct their own proprietary end-to-end national network.

U.S carriers should take note. 

By John Celentano, Inside Towers Business Editor

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