Coopetition in Telecom: How Rivals are Building the Future Together

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The telcos rigidly sticking to traditional business models are being left behind. With connectivity now a basic expectation in large parts of the world, telecom companies struggle to distinguish themselves from the competition. So maybe the answer isn’t to compete on connectivity? Instead, the telecom industry should embrace “coopetition” and find new higher profit services that set themselves apart from their rivals.

What is Coopetition?

Coopetition is when competing parties cooperate in specific business areas to create mutual benefits while still going head-to-head for customers. A portmanteau of “competition” and “cooperation”, coopetition can take many different forms. This includes two or more competitors that are either vertically connected in the value chain or horizontal parties – directly competing with like-for-like services.

Regardless of the form it takes, coopetition is only viable when it is advantageous to everyone involved. Businesses aren’t in the business of helping competitors with nothing in return. 

Coopetition has its roots in game theory and finding opportunities where the market changes from a zero-sum game (one business wins at the expense of another) to a positive-sum game (one business winning is neutral or positive for its competitor).

This is obviously challenging, given that players in the same industry typically compete for the same customers. But in the right market conditions, coopetition can allow companies to:

• Increase the market's overall size so that there is a larger number of customers to compete for.

• Develop and drive the adoption of industry standards to improve the customer experience and the perception of the sector as a whole.

• Innovate existing technology together to enable new products and services.

• Pool resources to compete with larger operators and eat into their market share together.

Why Coopetition is More Prevalent Among Telecos

1.High CapEx

High CapEx is needed for infrastructure development, particularly for the ongoing deployment of 5G, which requires a denser concentration of cell towers due to its shorter range. The cost burden for this infrastructure would be too much for a single company to shoulder. Cooperating on high-cost but essential network upgrades allows telcos to increase capacity while competing on service quality, pricing, and customer experience.

2.Limited Spectrum Availability

The spectrum available to the telecom industry is limited, with competing parties (across multiple sectors) wanting to use it. Governments typically auction off spectrum bands, with fierce competition driving up the price. Coopetition limits expense through sharing the spectrum in certain regions or deploying shared networks to help maximise the value derived from this finite resource.

3.Ensuring Seamless Connectivity

The seamless connectivity customers expect requires some level of cooperation or at least interoperability across the telecom value chain. Telcos need broad and reliable coverage. While they may compete heavily in urban areas, rural locations often necessitate cooperation through network-sharing agreements to ensure coverage without unsustainable costs.

4.Scale and Scope

The scale and scope of R&D for new technologies and network upgrades are considerable. Coopetition allows telcos to work together on foundational technologies, significantly reducing the time-to-market. Plus, with input from firms specialising in different fields, the telecom industry can develop higher-quality standards and services that are interoperable for an enhanced consumer experience. 

Scale also leads to greater cooperation in Europe than in the US and China, where a single company can grow its subscriber base to make larger investments alone.

Real-World Examples of Coopetition in the Telecom Industry

1.Development of the 5G network

The most significant real-world example of coopetition in the telecom industry was the development and rollout of the 5G network. Cooperation among telcos, including major operators such as Verizon, AT&T, and T-Mobile, was a strategic necessity, not a choice, due to the:

• Complex technical requirements of developing the technology

• Massive infrastructure investment required

• Need for global standards to ensure interoperability

The R&D and infrastructure investments alone were significantly greater than any single company could handle. The 3rd Generation Partnership Project (3GPP) brought together hundreds of stakeholders, from telecom companies to hardware manufacturers, to agree on the technical frameworks that define how 5G networks operate. 

Without such cooperation, fragmented development could have led to incompatible technologies across different regions, slowing global adoption. Beyond 3GPP, network-sharing agreements allow operators to work together to build and maintain infrastructure, including base stations and fibre networks. 

The 5G network and previous generations are shining examples of coopetition. While telcos fiercely compete for customers, they combined research efforts, shared network infrastructure, and standardised technical aspects to bring faster mobile internet to customers around the world.

2.Orange and Deutsche Telekom in the UK

In 2010, Orange and Deutsche Telekom merged their UK operations (Orange UK and T-Mobile UK ) to form EE (Everything Everywhere). This strategic coopetition alliance allowed the two companies to collaborate in one market while still competing across other European and global markets. 

Consolidating UK operations reduced operational costs through pooling resources. In particular, combining network infrastructure and retail presence boosted coverage and increased their reach across the country. This enabled the company to compete more effectively with larger UK telecom giants such as Vodafone and 02 while investing in the burgeoning 4G infrastructure.

3.Orange Belgium and Proximus Network Sharing Agreement

In 2019, Orange Belgium and Proximus signed a term sheet for a mobile access network sharing agreement including 2G, 3G, and 4G technologies. The agreement enabled faster 5G rollout across Belgium while both companies retained control over their spectrum resources, operated their core networks independently, and competed for customers delivering different services and user experiences.

Upon its announcement, Orange Belgium stated the agreement would deliver €300 million in savings over ten years from cumulative OpEx and CapEx. Industry experts from CCS Insight explained the business case for the partnership, stating,

“The deal between Orange and Proximus is just the latest in a series of network partnerships designed to keep a lid on costs and accelerate deployment.

“Although the approach could limit opportunities for operators to differentiate based on connectivity, it could free up investment in other areas such as content, vertical markets and new services. This can only be to the benefit of the consumer.”

Developing New Telecom Business Models Using Coopetition

Telcos face real challenges as their traditional services increasingly become seen as an everyday utility. This limits pricing power at a time when demand for data is skyrocketing. PwC’s inaugural Global Telecom Outlook expects data consumption to triple from 2022 (3.4 million petabytes) to 2027 (9.7 million petabytes). However, revenue is only projected to grow modestly, with a 4% CAGR, through 2027. 

In the hunt for higher margins, more telcos are diversifying their offerings away from pure connectivity plays. In this context, coopetition opens the door to a range of potential opportunities. Competitors can share infrastructure costs and collaborate on developing new technologies, standards, and platforms while competing on over-the-top services. 

Offering new services and investigating alternative business models is not a new phenomenon in the telecom industry. However, working together with the competition, typically outside of shared commercial jurisdiction, could be critical to reducing costs and entering more profitable markets. 

With the continued rollout of 5G networks, Telcos should collaborate to develop new services jointly. This could include:

• Platform-based services such as IoT ecosystems that provide a unified solution across different devices.

• Edge computing capabilities for enterprise complemented by 5G networks.

• Telcos working together and pooling resources when entering new markets or developing new services.

Telcos could also develop cross-industry partnerships with companies that are more familiar with services outside of the traditional telecom business model.

Using XME to Experiment with New Services

Something new always leads to new problems. Telcos must find a way to experiment and develop new services without the associated high costs and long development time.

XME is an enterprise integration middleware platform with out-of-the-box integrations to help telcos launch new services and work with cross-industry partners. Schedule a demo with our experts today and discover how our enterprise integration middleware enables new telecom business models at a fraction of the cost and time.