Bonus 20-year prediction: Mobile networks come back to where it all began – a single network per market

This year, Northstream celebrates our 20-year anniversary. In our founding year, Nokia became the world leader in mobile phones, there were 100 million mobile subscribers globally, and Northstream was occupied with projects touching upon cutting-edge technologies such as WAP, i-mode, and WCDMA. To highlight this milestone, we want to raise our gaze from the one to five-year perspective we normally take, and look to the horizon as we make an educated guess as to how our industry may look 20 years from now. We promise to do a thorough recap in 2038.

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We stated in the previous prediction that we believe a more positive view of in-market consolidation may soon surface among regulators. This would ultimately lead to a more stable business environment where European operators get an increased ability to make the investments necessary for future communications technologies, attracting new owners more focused on long-term cash generation than revenue growth. These owners have had the realization that the business of network operation is very different from the one of handling end customers, and strive to separate them and hold on only to the network operation part.

Once such a development has established itself in the industry, the case for further consolidation is clear – this time focused only on the physical assets. When the network operations (NetCo) of each of the ~3 operators in every market has been separated from the end-customer business (OpCo), it simply does not make economic sense for three parallel networks to coexist even in a large European country. Particularly as tomorrow’s societies will increasingly be reliant on stable communications networks, the demands of investing in areas such as resiliency will lead to a hard limit in the amount of networks that can be maintained. Our view is that the number of physical mobile networks will initially settle at two: one “quality” network likely managed by the incumbent, and one “challenger”. The goal of the owners of these NetCos will just be to maximize the utilization of the infrastructure, and hence there will be no incentive to sign exclusivity deals with one or a few OpCos. The business will instead be run with a wholesale model, with equal and transparent pricing to all, purely based on volumes and quality.

On the OpCo side, the fact that the business has been separated from the NetCo effectively means that everyone is an MVNO. As anyone can get wholesale access to the same networks on the same terms, new companies can compete side-by-side with the spin-offs from the legacy operators. The first to take advantage of this will likely be well-established consumer brands such as banks and supermarket chains, as well as tech giants.

Entering a timeframe around the 20-year mark from today, the “two NetCo, many OpCo”-structure has likely stabilized itself in most markets. Mobile communications have then become established and matured enough to become a true utility, similar to water and electricity. If there is no need for parallel infrastructure for these technologies, why should mobile communications have it?

This realization triggers the final wave of consolidation, and we go from two to a single network per market. We have thereby come full circle, back to the 80’s, where it all began with a single nationwide mobile network, and the next 60-year cycle begins…

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