Mobile operators will struggle with hefty capex for LTE

5 Oct 2009

A typical Long Term Evolution (LTE) or 4G migration could cost mobile operators up to US$1.78 billion in capex expenditure alone in the first year, statistics show.

Independent network planning consultancy Aircom International revealed the economic reality of LTE migration facing mobile operators around the world – as much as US$1.78 billion for a tier one US operator in the first year. 

As the economic downturn puts pressure on credit markets, and mobile operators attempt to limit significant capex commitments, Aircom believes that innovative approaches to LTE network roll out, network sharing for example, will be essential in ensuring the profitable delivery of future mobile services. 

LTE investments vary by region, the legacy equipment operators have in place and the spectrum they have available.  However, Aircom estimates the total capex investment facing a tier one mobile operator in the first year of roll out to be as follows:

  • US                   US $1.78 billion
  • Europe            US $880 million
  • Middle East    US $337 million
  • Asia Pacific    US $232 million

“LTE represents a major undertaking for mobile operators,” said Margaret Rice-Jones, CEO at AIRCOM International.

“With an all IP-based network infrastructure, LTE requires completely new thinking compared to previous mobile technologies. Mobile operators around the world face very different challenges in embracing LTE, which will have serious implications on the levels of finance they need to raise.”

While raising capital in today’s volatile global financial markets continues to prove difficult, operators and supporting infrastructure vendors are struggling to find the necessary credit to support the necessary enhancements to their radio network, backhaul and core network infrastructures. 

Rice-Jones continues: “Very few operators have the available resources or shareholder freedom to meet these costs. This means that innovation within the mobile industry needs to be redefined. It has been traditionally tied to finding the next ‘killer application’. The economic reality of the mobile industry now means that true innovation is finding technology that will enable operators to deliver services more cost effectively.”

Aircom believes mobile operators can embrace innovation in a variety of different ways.  Most significantly, operators must accept that the techniques used to drive efficiencies and revenues with previous technologies will not be applicable to LTE. Mobile operators must therefore find new business models to monetise LTE, compared to subsidising handsets and offering free voice minutes in return for fixed-term contracts.

The significant investment required for LTE deployment could also see mobile operators globally embracing network sharing as a means of reducing capex and opex. 

Other innovative ways of lowering costs include the automation of key optimisation processes through the roll out of self-organising networks (SON) and the deployment of femtocells within a network to cost effectively provide macro network offload capabilities as well as indoor coverage solutions.

“Despite the financial commitment required, there can be no doubting the tremendous potential of LTE technology in taking mobile services to the next level,” added Rice-Jones. 

“LTE represents a major evolution and mobile operators must take an intelligent approach to network migration. With careful planning however, LTE will deliver sufficient network capacity and data speeds to further enhance the delivery of high bandwidth services to consumers globally.” 

By John Kennedy

Photo: Aircom believes mobile operators can embrace innovation in a variety of ways, such as automating key optimisation processes through the roll out of self-organising networks.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years