Vodafone O2 Create New Company CTIL

October 15, 2012

For some years now Vodafone and Telefonica (O2) have been operating a network sharing agreement – broadly similar to the Orange/T-Mobile/Three arrangement. This arrangement allowed each company to share the other party’s installation.

In September 2012 approval was received from the Office of Fair Trading for the formation of a new company – Cornerstone Telecommunications Infrastructure Ltd (CTIL).

The new company will create and manage the single grid network of installations previously belonging to both of the operators. Both Vodafone and O2 are transferring their current sites to the new company – the aim being to further develop operating efficiencies. However both companies will continue to operate their businesses independently.

In the first instance it is expected that a review of existing installations will be carried out. On the basis one of the objectives for creating the new company is to reduce costs, it is expected that this review will lead to a reduction in site numbers. Developments in technology could also impact on this, further reducing the number of sites.

Where an overlap in site coverage is identified (by both O2 and Vodafone having installations nearby), landowners on which the installations are situated, are likely to be approached to terminate the lease early. These negotiations need to be carefully considered if potential opportunities are not to be missed.

Sites earmarked for retention are likely to be subject to requests for changes to lease terms. Once a site has been identified for retention, the operator of the current installation will look to transfer their rights to CTIL. Whether or not this can be done will depend on the terms of the right to occupy. Where an approach to assign a lease is made, one can expect the existing operator will want to retain rights to use the site - often for no additional payment. Whether or not they look to include rights for the partner, only time will tell. Again, careful review of the current arrangement will be necessary to determine if the rights to sublet and assign exist, and the extent of those rights.

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