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BT confirms 3G building contract with Deutsche Telekom

Saves themselves £2.5 billion

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BT and Deutsche Telekom have signed legally binding contracts over the joint construction of 3G phone networks in Europe. They reckon the deal will provide them with 30 per cent cost savings over a 10-year period - amounting to around £2.5 billion.

Both companies announced their intention to build the networks together in June when the German regulator RegTP relax its rules and mobile operators realised they could save themselves millions by working together. As such it's not really mind-blowing news but both companies' share prices have dropped: DT 4 per cent and falling; BT 8 per cent and falling.

It's impossible to tell whether this is a positive or negative reaction from the City since all shares are in turmoil at the moment (the FTSE100 is down 6.3 per cent as we write). However the logic behind the deal is hard to argue with: all mobile companies - BT and DT in particular - are seriously in debt thanks to the huge amounts paid for 3G licences.

3G networks require new equipment and hundreds more transmitters and that's going to cost yet more millions. And all this before one penny from consumers has come in. It makes perfect sense to join forces - both financially and environmentally. In fact there isn't a 3G operator left that hasn't twinned with someone.

The actual deal is between mmO2 (formerly BT Wireless) and T-Mobile (DT's mobile arm). And here are the all-important quotes:

Peter Erskine (chief exec, mmO2): "Today's announcement is another important development for mmO2. We are now in a position to move into the implementation phase and focus on driving forward our 3G network roll-out plans in Germany and UK. This exciting agreement should lead to substantial cost-savings, faster network coverage for O2 in Germany, and the additional benefit of reducing the number of cell sites needing to be deployed in both countries for 3G."

Kai-Uwe Ricke (chief exec, T-Mobile): "The speed with which we have reached agreement on these detailed technological and operational points indicates the spirit of co-operation we have established on this issue. Reaching this point means both groups can start to realise a more cost effective 3G network construction in two of the most advanced markets for mobile services in the world." ®

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