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O2 - 3G UMTS, United Kingdom




Key Data


O2 completed the construction of a 3G UMTS (Universal Mobile Telecommunications Standard) network across the UK in February 2005. The 3G network is now available in over 20 major cities and towns throughout the UK, and by August 2006 had coverage of over 85% of the UK population. The company launched 3G services in Germany during March 2004 and the launch of the UK network – although not the first in the UK – was the next step in the establishment of a Europe-wide 3G network.

In early 2006 O2 had 27.5 million subscribers and an announcement was made that the company was being sold to Telefonica of Spain for £18bn (this effectively ended the previous cooperative agreement in the expansion and operation of their European networks between T-mobile and O2). The purchase of O2 now effectively isolates T-mobile parent company Deutsche Telecom in the European market.

Telefonica has stated it expects to make money from the purchase of O2 through economies of scale resulting in cost savings of an estimated €293m (£198.8m) a year by 2008. However, many industry experts think that Telefonica have paid over the odds for the company (but they had to do this to stop T-mobile acquiring it).

LICENCE AWARDS

The company was one of five major telecoms bidders to be awarded 3G licences in the 2001 auctions by OFTEL; the licence, which cost £4bn, runs for 20 years. The investment from O2 to build its European network, which included the UK and Germany, was more than £4bn.

However, an agreement between O2 and T-mobile was reached in September 2001 to cooperate in building their 3G networks across the UK and Germany. This saved each company over 30% on their expected construction costs by reducing the number of base transceiver stations required and made the construction of this integrated European 3G network much faster.

The agreement will no longer be in operation when Telefonica take over O2 during 2006. The O2 rollout was originally scheduled for mid-2003, but the launch was delayed to 2005 following an announcement by OFTEL that it wanted mobile operators to cut their tariffs in stages by up to 60% by March 2006 – a crushing blow for a company already in debt from buying an expensive 3G operating licence.

3G NETWORK CONTRACTORS AND CONSTRUCTION

The contract for equipment for the core 3G network was awarded to Nortel Networks and Nokia. The company has invested £1.35bn in what it calls its 'do it once' strategy, which means that it has created a uniform architecture for its existing GPRS and its new 3G network resulting in a seamless changeover.

The contracts require both Nortel Networks and Nokia to each provide 30% of the Base Transceiver Stations (BTS), with both companies competing to provide the remaining 40% of the BTS of the core network.

Nortel Networks provided equipment and expertise for the T-mobile 3G networks in Germany and the UK, which made the 3G cooperation between T-mobile and O2 much easier. The other equipment on the network is a mixture of integrated equipment from both Nokia and Nortel Networks, including: Internet Base Transceiver Stations (BTS); unified packet IP core networks based on Nortel Networks' Passport multiservice switches and Contivity VPN switches; network applications based on Nortel Networks' Preside and Shasta 5000 broadband service node. O2 and Nortel have also been testing High-Speed Down-Link Packet Access (HSDPA), which is a system that can significantly increase the speed of 3G data transfer; this is not due for implementation in the current phase of work on the project.

CELLULAR BASE STATIONS

Mivan Telecom Limited had a contract with O2 to undertake full acquisition, design and construction of cellular base stations across the UK. The scope of the contract involved civil and structural engineering and design, electrical engineering and design, REC management, new construction on greenfield and rooftop locations and upgrading existing sites. The roll out is still continuing even though the network has launched less than 50% of the UK population is covered. The roll out was completed in 2006.

SERVICE LEVEL MANAGEMENT

Digital Fuel Technologies Inc is a developer of software that manages the cost and performance of enterprise services. They were awarded a contract with O2 in May 2002 to assist in managing service levels across the O2 product portfolio. The software system will integrate the Operational Support Systems (OSS) and Business Support Systems (BSS) for O2 and enable service levels to be monitored and reported against major products and services.

NETWORK PERFORMANCE

O2 is to utilise the Arieso's 'Altaro' network optimisation technology to provide subscribers the best possible service for the new 3G network. Altaro automatically produces the optimal network configuration - the best combination of power levels, antenna type, direction and tilt, producing the best possible coverage, capacity and quality of service for minimum cost.

Altaro means that a network can be designed and constructed more cheaply and can result in improvements of over 30% in network coverage and capacity. O2 UK field results have shown a doubling of coverage with major improvements in other quality metrics.

O2 HSDPA NETWORK

O2 is in the process of rolling out high speed downlink packet access (HSDPA) across the company’s national 3G networks starting in the third quarter of 2006. O2 completed the testing of HSDPA technology on the Isle of Man in early 2006 and the network was launched commercially. The new roll-out will see the service launched in the UK, Germany and Ireland.

The upgrade will improve the network’s data performance; taking download speeds up to 1.4Mbps, though O2 will eventually be expecting to improve data rates to 3.6Mbps and upload speeds should be 384Kbps. By early 2008 the download speed is set to rise to 7.3Mbps before approaching 10.2Mbps in late 2009. Initially the service will be a data only service delivered direct to PCs by the use of HSDPA-equipped Sierra Wireless AirCard 850 PCMCIA cards. Handsets capable of accessing the faster download speeds will be available later.