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A quick guide to mobile service operators

With much of news coverage on the recent mobile frequency tender announcement looking like secret coding – MNO, GSM, CSP,  3G, UMTS and others – the Budapest Business Journal has decided to de-code the message to give a brief overview of what running a mobile service entails.  

The field of telecommunications is as complex as it is integral to modern societies. An infrastructure worth billions of forints, a workforce of thousands and innovative developments in transmission translate into a simple phone call or a text message for millions of people. So what stands between a customer and a mobile service operator?

It’s all about frequencies

‘Frequency’ is a key word in mobile service industry, indicating a set of frequency ranges within the Ultra High Frequency band allocated for cellular phone use. In order to launch mobile services, a company has to obtain a radio spectrum license. In Hungary, like in most other countries, the government and relevant authorities have the sole power to distribute new licenses on a limited number of frequencies, the power it will exercise this fall, when it will attempt to sell a radio band for a fourth mobile service.

The European Telecommunications Standards Institute (ETSI) developed a technological standard known as the Global System for Mobile Communications or GSM. According to the GSM Association, nearly 80% of the world uses GSM technology for wireless calls. Its networks are divided into 2G and 3G frequency ranges. 2G networks generally function in the 900 MHz or 1800 MHz bands. 3G GSM networks usually operate in the 2100 MHz bands.

In the jungles of infrastructure

Establishing infrastructure to launch cellular phone services is a multi-billion forint endeavor that not every company can afford. Besides telephone centrals, customer support services and base stations, a company has to provide base station controllers (BSC) in order to maintain control functions and physical links between the mobile services switching center (MSC) and the base transceiver station (BTS). Another integral component a company requires is the Intelligent Network (IM) solutions, which would allow it to differentiate itself from other operators.

Base stations or ‘cell towers’ must be located all throughout the country to provide coverage for the entire population. In the first few years of operating in Hungary, Vodafone, for example, had to erect 1,200 such stations. Often, the towers have to be camouflaged in order to blend in the surrounding environment.  Whether concealed as a tree or an architectural piece, camouflaging is an additional expense.

A loophole of mobile business

Due to the high expenses in setting up infrastructure and the limited number of radio spectrum licenses, some companies opt for mobile virtual network operations (MVNO). They can still provide mobile phone services; however, they have to partner up with an established mobile phone operator for infrastructure, which is why they are often referred to as “switchless resellers.”

Earlier this summer, news portals reported that Tesco is considering the launch of such network, based on the types of domains it registered, including tesco-mobile.hu and tesco-mobil.hu. The reports further speculated that the supermarket chain would team up with Vodafone for its infrastructure in Hungary. If confirmed, Tesco will join the already diverse MVNO market in Hungary, which includes such providers as Postafon, Btel, Red Bull Mobile and others.

Second time is a charm…hopefully

With the announced tender for a fourth mobile operator approaching, many think back to 2008, when Hungary’s National Communications Authority (NHH) invited bidders for new mobile telecommunications frequency. However, it later canceled the tender due to deterioration of economic environment, which “questioned the financing conditions and (investment) return projections of the bids.”

Digi, Mobinet and DreamCom subsequently appealed the decision in court, whose ruling in favor of the NHH destroyed any hope the companies might have had of entering the mobile telecommunications market.

Whether the authority, now called NMHH grants the spectrum license this year to a fourth player or distributes the block among the existing providers, one thing is clear: competition is about to get more intense, be it in terms of services, infrastructure or investments.