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Monday, 2 April, 2001, 14:55 GMT 15:55 UK
Nokia to build UK 3G network
Nokia WAP phone
Nokia: Building networks as well as handsets
Nokia, the world's largest mobile phone handset manufacturer, has signed a 500m euro (309m, $440m) contract to supply Hutchison 3G with equipment for its third generation mobile phone network in the UK.

The Hutchison 3G group shelled out 4.38bn for its licence, and must now pay the additional cost of building its network from scratch.

The cost of the UK's 3G licences
Hutchison 3G - 4.38bn
Vodafone - 5.96bn
BT - 4.03bn
One2One - 4bn
Orange - 4.1bn

The high development costs of the new faster network have been weighing heavily on telecom firms, with a growing number of alliances now in the pipeline in order to try and share costs.

The new improved licences will eventually allow mobile phone users to watch videos or access the internet from their handsets.

Hutchison also announced that it has secured a $5.1bn (3.59bn) financial package, that will fully fund it beyond 2002, its launch date for initial services.

The package is partly funded from banks, and partly through equipment leasing deals with manufacturers including Nokia, Japan's NEC and Germany's Siemens.

Declining handset demand

Nokia will supply core network equipment for Hutchison's network which will cover about half of the UK.

Analysts estimate that each 3G network will cost between 1.5-2bn to build in the UK, on top of the fees paid in the auctions.

We are looking to collaborate and we would be willing to do so

Japan's NEC also won an equipment-supplying contract from Hutchison, valued at over 200m.

Increasingly tough market conditions caused Nokia to cut 400 jobs and its sales forecasts in March.

The deal with Hutchison is part of its strategy to increase its field of work outside of the production of handsets, whose sales growth is slowing.

Hutchison 3G UK is 65% owned by the Hong Kong conglomerate Hutchison Whampoa, with Japan's NTT DoCoMo and Dutch KPN holding the remaining share.

Enthusing to collaborate

BT has also declared its desire to share costs, saying it has contacted other British mobile operators to help foot the bill.

Sharing facilities is certainly worth investigating

The high cost of third generation phones has weighed heavily on BT, which has come under intense pressure to take firm action in order to reduce its 30bn debt mountain.

"We are looking to collaborate and we would be willing to do so," said a spokesman for BT Wireless, the group's mobile arm.

Vodafone is also interested in the idea of collaboration, particularly in the area of sharing bases for new aerials.

"Sharing facilities is certainly worth investigating because there are cost savings and less of an environmental impact," said a Vodafone spokesman.

But the UK's biggest firm has previously shunned offers to share the development of hardware for the networks in Germany.

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See also:

05 Jan 01 | Business
Mobile groups to pay hefty price
05 Dec 00 | Business
Nokia: 'Best is yet to come'
20 Oct 00 | Business
Ericsson's mobile woes
27 Mar 01 | Business
Ericsson and Nokia cut jobs
09 Jan 01 | Business
Nokia sales prompt telecoms slump
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