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UK's 3G networks are suffering from chronic underinvestment

Published by Unwired Insight

Telecommunication consultant Mark Heath, of telecom consultancy Unwired Insight, reveals major differences between countries and operators in 3G CAPEX as a proportion of 3G revenue – ranging from 43% down to 6% in 2009. In its league table of mobile network investment, the UK operators are near the bottom.

Unwired Insight's regular tracking of mobile network CAPEX and mobile network investment continues to show profound differences between individual countries and mobile operators in terms of 3G investment levels, which inevitably has a direct impact on quality of service for mobile users.

Dr Mark Heath, co-founder of Unwired Insight said, "Our analysis reveals major differences between countries and mobile network operators in CAPEX as a proportion of revenue – ranging from 43% down to 6% in 2009. In our league table of operators, the UK operators were near the bottom."

These numbers are particularly worrying when you consider that the revenue per operator of UK mobile operators is relatively low compared with many other countries, where operators have stronger ARPUs and higher market shares. Furthermore, given the continued pressure from investors to control costs (particularly as there are no immediate prospects of a significant increase in mobile ARPU) there is little prospect of substantial short term capex uplift for operators.

"A comparison between the UK and Japan is stark," says Mark Heath. "NTT DoCoMo has been investing huge sums in its 3G networks for many years, recognising the importance of mobile coverage."

In the year ending March 2010, NTT DoCoMo’s CAPEX was USD8.3 billion. Despite this huge sum, CAPEX as a proportion of mobile revenue is not particularly high (19%) because NTT DoCoMo has a large market share (about 50% in the first quarter of 2010) and very healthly mobile ARPU (USD65.0 per month). In March 2007, NTT DoCoMo announced that it had reached 100% 3G coverage of the population. It has deployed more than 50,000 outdoor base stations and over 20 000 indoor base stations. NTT DoCoMo is so far ahead that it will shortly be able to switch off its 2G network – something that most European operators will be unable to do for many years. 2G network close-down will come in March 2011.

This comparison raises worrying questions for mobile network operators and mobile industry investors, over what investment levels are realistically required to deliver high-quality mobile broadand services. Low investment in mobile networks will fail to address many of the mobile coverage and quality issues experienced by users today.

"As mobile network traffic levels continue to climb, UK operators need to define a clear vision of where their networks are going, and how they are going to achieve a step change in investment.", says Mark Heath. "Otherwise, we’re going to be in for a bumpy ride in terms of the quality of mobile broadband services."

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Dr Mark Heath, Co-founder of Unwired Insight

About Unwired Insight
Telecom consultancy Unwired Insight helps companies inside and outside the mobile industry with their mobile strategy. Its customers range from leading multinational network operators, equipment vendors, investors and lawyers, to emerging start-up companies. Telecommunication consultant Mark Heath has authored over 40 major reports on the opportunities and threats from wireless technologies and services, which have been sold to more than 250 companies worldwide.

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