Telecoms join to send a clear signal right throughout UK

DEUTCHES Telekom AG and Hutchison Whampoa Ltd have agreed to combine their high-speed wireless networks in the UK to extend reach and reduce investment costs.

T-Mobile, the unit of Germany's biggest phone company, and Hutchison's 3 UK set up a 50-50 joint venture, called Mobile Broadband Network Ltd, to manage their shared networks, the companies said in an e-mailed statement yesterday, Bloomberg News reported. Combined cost savings will reach 2 billion pounds (US$4 billion) over 10 years.

The agreement will enable "almost complete population coverage" by the end of 2008 across Britain for so-called third generation services which allow Internet browsing, video conferences and music downloads, the companies said. T-Mobile is the UK's second-largest mobile-phone company by subscribers after Telefonica SA's O2.

"When you collaborate you can reduce the costs," said Hannes Wittig, an analyst at JPMorgan Chase & Co in London. "Both T-Mobile and 3 have coverage issues in the UK and it would be sensible for them to share the costs of regional expansion. It's something you have to do to stay in the game in the UK."

The network-sharing agreement between T-Mobile and 3 follows similar deals in recent months with other operators.

Vodafone Group Plc, the world's biggest mobile-phone company, and Telecom Italia SpA said in November they would share mobile network access sites to use their infrastructure more efficiently.

T-Mobile had 17 million customers in the UK at the end of September, making it Deutsche Telekom's third-largest wireless market by subscribers after Germany and the US. T-Mobile International had almost 114 million users across 11 European countries and the US.

The UK wireless unit of Hutchison Whampoa, controlled by Hong Kong-billionaire Li Ka-shing, had 4.1 million customers in the UK at the end of August. The company runs wireless operations in Australia, Austria, Denmark, China's Hong Kong, Ireland, Israel, Italy and Sweden.

The deal between T-Mobile and 3 makes it less likely that 3 will be bought out by another UK operator, said JPMorgan's Wittig.

"The deal makes Hutchison more profitable as a consequence and thus delays market consolidation," said JPMorgan's Wittig.

Third-quarter revenue at the T-Mobile UK unit rose 7.4 percent to 1.25 billion euros (US$1.8 billion), and adjusted earnings before interest, taxes, depreciation and amortization climbed 12 percent to 365 million euros.

T-Mobile International is Deutsche Telekom's largest division and accounted for 54 percent of the former monopoly's net revenue in the first nine months.