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Friday, 6 July, 2001, 16:04 GMT 17:04 UK
3G operators urged to team up
Slowing mobile subscriber growth in Western Europe
More and more mobile operators are looking to share the cost of building networks for third-generation (3G) mobile phone services.

Dutch telecoms company KPN has confirmed it is in talks about sharing costs for building its German network.

Some mobile phone operators could save up to 40% of the cost if they teamed up, according to a report from telecoms consultancy Analysys released on Friday.

By March this year, about 54 licences to operate the new technology - which offers high-speed internet access on mobile phones - had been awarded at a cost of 105bn euros.

A whopping 98% of this was spent on licences in Italy, Germany, the Netherlands and the UK, Analysys said.

Counting costs

Pressure to team up is greatest in the UK and Germany, where licence fees were the most expensive.

Cost of 3G roll-out
Mannesmann: 5.1bn euros
Europolitan: 2.8 bn euros
BT Cellnet: 2.5 bn euros
Source: Analysys
Already British Telecom and Deutsche Telekom have announced they are to share the cost of building the infrastructure.

The debt-laden British company could save up to 30% on the capital cost of building the networks and make further substantial savings on operational costs.

Vodafone and Hutchison 3G - due to enter the UK market in mid-2002 - are also thought to be considering partnering up to share the cost of the networks.

The most likely partnerships are between incumbents and new entrants, Analysys said, with incumbents able to drive a hard bargain in their home market.

Incumbents already have second-generation (2G) networks, so the new entrants - having to start from scratch - have the most to save by finding a partner.

Where population density is high, savings from sharing could be highest in urban and suburban markets.

'Green' savings

There are strong environmental reasons as well to team up, Analysys pointed out.

In the UK alone, 35,000 new masts are needed, while in Germany up to 50,000 new masts are needed.

Already, Swisscom has run into public opposition for the 2G masts it has put up - this anger is only likely to grow when operators start putting up 3G masts.

But legal difficulties could arise.

A statement by the DTI and Oftel in May warned that any proposal on infrastructure sharing would depend on the consequences for consumers.

The German regulator has given the green light for some co-operation to take place.

However, the status in other countries is unclear.

Analysys researcher Debbie Morgan said: "The licence conditions will not be changed. From a legal point of view, that will not change.

"It is just how far network sharing can take place within the current framework."

Not good to share?

Some argue that sharing might only offer a temporary advantage to operators.

Analysys conceded that the cost advantages diminish after the first five years. After that, it might make sense for operators to look at building their own networks.

Some argue that incumbents might be foolish to team up with new entrants as both competitors products will hit the market at the same time.

Analysys's Debbie Morgan said that even if they lose the time-to-market advantage, "the success of the 3G technology will be down to services each operator offers".

Potential savings
Orange/Hutchison link-up in UK: 2bn euros
Mobilcom/Mannesmann link-up in Germany: 4.8bn euros
E-Plus/Mannesmann link-up in Germany: 1.5bn euros
Source: Analysys

Falling voice revenues

As the mobile phone market reaches saturation point, it will become even more crucial for the operators to look to cut costs.

Voice may now account for about 90% of Western European mobile revenues, but is set to fall to 35% by 2011.

Non-voice revenues, such as infotainment services, should generate about 130bn euros by 2011. This compares with a current estimate of 7bn euros.

Figures due out by Monday are expected to confirm that Orange has seized second place from BT Cellnet in the UK market.

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See also:

06 Jul 01 | Business
Orange overtakes BT Cellnet
12 Jun 01 | Business
BT and Deutsche Telekom in 3G deal
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