Jennigay Coetzer – Business Day 30 July 2009

Many telecommunications operators worldwide are outsourcing the management of their network infrastructure to specialist third part service providers in a bid to increase efficiencies and save costs. In this case, the network is run by the service provider as a utility that delivers voice and data at a guaranteed service level.

This allows the operator to focus on customer retention, marketing, growing its market share and introducing new services. This trend was originally brought about by influencing factors like the shortage of technology skills, but more recently it is being driven by the financial crisis and the need to control operating expenditure, says Gary Dewing, head of global services for sub-Saharan Africa at Ericsson.

“We are seeing a massive increase in this trend and Africa is ripe for this.” He says it is expensive to operate networks and achieve economies of scale in Africa, largely because it is difficult to duplicate operations and use the same workforce in multiple countries.

Regulations differ from one country to another and operators are forced to use local labour, which often means duplication. Ericsson has recently signed a deal with mobile operator Zain, which operates in 22 countries in Africa and the Middle East and is headquartered in Bahrain, to manage its Nigerian network.

In terms of the five year outsourcing deal, which was concluded in June, the network transformation phase will include moving operational management offshore. “We will run the network and back office functions from one of our global network operation centres, which are based in low-cost locations,” says Dewing.

Ericsson will manage more than 4000 of Zain’s sites across Nigeria, and 450 operational employees will be transfered from Zain to Ericsson, and will undergo further training in the latest wireless technologies. “In the case of Zain’s Nigerian network, we believe we can improve voice quality about 20%,” he says.

In other parts of the world, operator Sprint in the US and Bharti in India have outsourced the management of their networks to Ericsson and Vodafone has outsourced its UK network to the company. The biggest and most recent of these deals was Sprint in the US, which is valued at $4.5 to $5 billion over a seven-year period and was concluded earlier this month.

Ericsson also manages networks for three Hutchison mobile operations in Australia and the UK from one of its central operation centres and is operating networks in Egypt for mobile operator Etisalat. “We are managing networks globally that collectively have 275 million subscribers,” says Dewing.

Some operators just outsource specific aspects of their network infrastructure to a third party service provider, such as their people, their transmission networks, field maintenance and sometimes even network design. Mobile operators worldwide are migrating their switching networks to IP based infrastructure, which will provide a platform into which they can plug any future technology, including the next generation 4G Long Term Evolution (LTE), and IPTV.

Right now to deliver live TV, operators have to install additional infrastructure next to the switches and convert the signal to work on the existing network, which takes up additional bandwidth. “In Africa we are already working with operators to modernise their networks and Zain and MTN are already using the latest technology,” says Dewing.

He says SA and African operators are at least one year ahead of markets like the US, South East Asia and South America in migrating their networks and are about one year behind Europe. The terrestrial and undersea fibre cable projects going on up the coast of Africa will reduce the reliance on satellite communication and consequently dramatically reduce the cost of transmission.

“Fibre provides 100 times the capacity at one tenth of the price of satellite and the benefit will hopefully be passed on to customers,” says Dewing.