Industry Trend Analysis - 2G Shutdowns To Boost Data Traffic Capabilities - AUG 2017

BMI View: Increasing data traffic is leading operators to adjust their strategy to meet capacity. One way to do so is refarming spectrum, potentially shutting down legacy networks, which will reduce costs for operators, having to maintain one fewer network. However, legacy services such as voice, M2M and regulation, mean the option is not available to all operators.

Sunrise has announced it will shut down its 2G network at the end of 2018, in order to focus purely on its 4G network. It is the second operator in Switzerland to do so, with incumbent Swisscom having previously said it would shut down its 2G network by the end of 2020. Operators are looking to refarm spectrum capacity for more advanced data networks, firstly 4G and 5G in the future, but there has been a difference in strategy across markets. While some operators have shut down 2G networks as in the Swiss examples, some have preferred to shut down 3G networks first, because 2G will continue to be used for basic machine-to-machine (M2M) services.

We expect the Swiss market will be free of 2G subscriptions from 2020, once Swisscom finalises its own plan. Third operator Salt Mobile has not publicly set out its roadmap, but we expect it will follow suit, especially as most of its tariff plans focus on 4G data access. Swisscom, which announced its own migration strategy as far back as 2015, wanted to shut down its 2G network earlier, but was unable to do so because of regulatory reasons, and its status as the Universal Service licensee in particular. With an earlier shutdown, Sunrise will look to take a small advantage over its rival in what is already a data-centric market, but we do not expect it will have much impact on competitive dynamics, as Swisscom will remain the overwhelming market leader. It will however reduce a certain number of costs for Sunrise, as it will run one fewer network.

Switzerland 2G Free From 2020
Mobile And 3/4G Subscribers, 2015-2021
e/f = BMI estimate/forecast. Source: National Sources, BMI

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