2013/05/23 LTE migration strategies pose challenges for CDMA operators

CDMA is arguably superior to GSM in radio technology terms, but CDMA ultimately failed to achieve the same level of success as GSM mainly because of limited international roaming and handset variety. In most developed telecoms markets, CDMA operators have gradually migrated their networks to GSM (for example, Telstra in Australia, Hutchison Telecommunications in Hong Kong and M1 in Singapore). CDMA operators have enjoyed prolonged success in a limited number of countries – for example, Japan, South Korea and the USA.

CDMA operators have many options for migrating to LTE

Outside these countries, most CDMA operators have a small market share, limited network coverage and generally remain niche propositions. CDMA has dwindling vendor support and operators are now faced with an existential question: where do we go from here?

Several migration options are available (see Figure 1), but voice provision will be the key factor defining the strategy.

Figure 1: Migration options for CDMA operators [Source: Analysys Mason, 2013]

However, the choice of LTE migration strategy is not straightforward

Replacing a CDMA network with GSM and/or UMTS networks (Options 2–5) will require significant investment and can be problematic because of limited available spectrum in standard GSM/UMTS bands. The operators may avoid network investments by signing a national roaming agreement with a GSM/UMTS operator for voice services (Option 5) but, because of low margins on voice services, CDMA operators are likely to evolve into data-centric operators, based on mobile broadband (closer towards Option 1).

Deploying VoLTE (Option 6) is a challenging and risky strategy. VoLTE-enabled devices are expensive and limited in variety, and it will take time, particularly in countries where handset subsidies are not prevalent, for such handsets to become widespread. Other challenges exist such as international roaming and general technological immaturity. MetroPCS Wireless, a CDMA operator in the USA, opted for the VoLTE route relying on handset subsidies and launched VoLTE in selected regions in 2012. However, the operator announced a merger with T-Mobile (USA) less than 3 months later. As a result, MetroPCS's voice subscribers are being migrated to T-Mobile's GSM network and MetroPCS's CDMA spectrum is being used to support LTE.

So far, many CDMA operators have been consolidating their positions with an intention to focus on data. In Ukraine during October–November 2012, one small CDMA operator exited the market, and Intertelecom, a CDMA operator, and Astelit, a GSM operator with a CDMA licence, announced a network-sharing agreement. The operators are focusing on mobile broadband and plan to launch LTE when the regulator introduces technology-neutral licensing. In Nigeria, MTS, Multi-Links and Starcomms (all use 1900MHz spectrum) and were merged into Capcom, a new entity that plans to launch LTE focusing on data. It is not clear what will happen to Capcom's voice subscribers (750 000 as of December 2012 according to the regulator, the Nigerian Communications Commission (NCC)). The NCC is working with the CDMA operators to get them either to upgrade to LTE or vacate the valuable 850MHz spectrum for future LTE deployments.

LTE offers an opportunity for CDMA operators to upgrade networks but also poses challenging questions. Commercial, market, spectrum and regulatory factors will define their migration strategy. Failure to migrate to LTE might mean that CDMA operators in countries other than Japan, South Korea and the USA are forced to exit the market and consolidate.

Source: Analysys Mason