VodafoneThree Reveals £1B Savings Plan, Casting Doubt on Open RAN

VodafoneThree’s chief network officer, Andrea Dona, recently expressed regret over the decision to abandon open RAN, stating that the technology would not have allowed the operator to meet critical targets. This decision comes in light of strict deadlines set by the Competition and Markets Authority (CMA) following the merger of Vodafone and Three at the end of 2024.

Dona explained to equity analysts that the current open RAN roadmap did not align with the CMA’s requirements. “The CMA have imposed very strict deadlines in terms of number of sites and in terms of spectrum solutions on those sites, by certain clear deadlines,” she noted. Consequently, VodafoneThree opted to forgo open RAN for its UK network.

Shift to Traditional Vendors

Open RAN’s standardized interfaces were intended to allow VodafoneThree to mix and match components from various suppliers, rather than relying on a single vendor for each site. Pre-merger, Vodafone had aimed to implement this approach at approximately 2,500 sites served by Huawei. However, due to a government mandate, Huawei’s systems must be removed by the end of next year, prompting Vodafone to pivot to Samsung and incorporate general-purpose IT equipment from Dell and Intel.

Faced with CMA-imposed deadlines, VodafoneThree abandoned its open RAN plans about a year ago, instead choosing to work with traditional suppliers Ericsson and Nokia. Dona mentioned, “We doubled down on two main suppliers with a £2 billion ($2.7 billion) contract, Nokia and Ericsson,” highlighting that these vendors developed specific radios tailored to VodafoneThree’s spectrum needs, which open RAN vendors could not fulfill.

Progress and Future Plans

Despite the shift, VodafoneThree claims to be ahead of the CMA’s targets. While Dona refrained from disclosing specific site numbers, she stated that the operator’s C-band network, operating in the 3.5GHz range, currently serves 50 million people. VodafoneThree holds about 200MHz in this frequency range, significantly more than its competitors BT and Virgin Media O2 (VMO2).

Upon finalizing the merger, Vodafone and Three had a combined total of around 37,000 sites, compared to BT’s 20,000 and VMO2’s 18,700. VodafoneThree plans to rationalize its sites to between 26,000 and 28,000, as stated by Iain Milligan, the operator’s director of network development and infrastructure.

VodafoneThree anticipates covering 99% of the UK population with 5G standalone technology by 2030, a significant increase from the 60% coverage reported in September. The regulator appears to support this reduced site number, as maintaining additional sites may not contribute to sales growth and could increase costs.

Cost Savings and Future Investments

As a result of its network rationalization, VodafoneThree forecasts annual cost savings of approximately £1 billion ($1.3 billion) by the fiscal year 2032, an increase from the previous estimate of £700 million ($926 million) by 2030. The company expects further savings as its network build concludes.

However, this shift away from open RAN and reliance on traditional vendors raises questions about the future of open RAN technology and Samsung, which Vodafone Group is still promoting in Germany and other European markets. The decision to abandon the original Samsung plan suggests that sticking with it would have delayed progress and potentially increased costs.

Impact on Workforce and Future Technologies

VodafoneThree’s savings plan also involves significant changes to its workforce and operational structure. By the end of 2028, the company aims to completely phase out legacy IT systems from Three, while also rationalizing its commercial operations, including distribution and marketing. Plans include closing over 200 overlapping retail stores and reducing pre-merger costs by 30%.

These measures have already impacted the workforce, with Vodafone’s latest annual report indicating a reduction of 1,716 employees, or 12%, compared to the previous fiscal year. Analysts have expressed skepticism about the company’s ability to achieve substantial earnings growth in the competitive UK market.

VodafoneThree CEO Max Taylor emphasized the potential for further efficiencies through AI, citing productivity gains of up to 40% in digital code development. However, this could lead to more aggressive staff reductions, raising concerns about the risks associated with new technologies.

As VodafoneThree prepares for peak capital expenditure in the coming year, it faces the challenge of upgrading its network while navigating the complexities of future technologies, including the anticipated rollout of 6G.

Source: lightreading.com