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Vodafone and O2 to merge mobile networks

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O2 and Vodafone will pool their mobile phone masts and antennas to slash costs and reduce the number of physical networks in Blighty to two.

The pair will compete as separate operators, using different radio frequencies, but by 2015 those signals will be received by jointly-owned antennas and backhauled over shared cables. The management of their shared grid will be divided vertically through England, leaving O2 with Scotland and Vodafone with Wales.

The move follows Everything Everywhere (formed by Orange and T-Mobile) and Three's efforts to pool their network tech in the UK.

Vodafone and Telefonica - the latter of which operates under the O2 brand - already share power supplies and air conditioning in many sites, which are run by the Cornerstone organisation, but they'll have to set up a new jointly-owned body to hold the combined network, which should total 18,500 sites.

That number was almost certainly selected to top EE & Three's 18,000 shared sites, but Vodafone and O2 are pooling both 2G and 3G infrastructure while the EE & Three deal only includes their 3G networks (Three having decided against running a 2G network at all).

EE and Three haven't said if their deal will extend into 4G technologies; they're holding on that decision until after the 4G spectrum auction, but Vodafone and Telefonica have made it clear that they foresee their combined network extending well into the fourth generation of mobile broadband.

Telefonica and Vodafone hold 2G spectrum at 900MHz, which has decent building penetration but is full of 2G customers. They also both have small holdings at 1800MHz and run their 3G networks at 2.1GHz like the rest of the world (although O2 has switched some of its 900MHz space to 3G around London and other areas).

Operating in the same bands makes sharing infrastructure practical, but it would be a good deal harder for either of them to share with EE, whose 2G network is all at 1800MHz.

How that maps onto the 4G networks we won’t know, but Vodafonica's commitment to deploy two 4G networks on the same infrastructure will impact the spectrum strategy of both companies: a combined network operator won't want to buy the chunk of 1800MHz that EE is required to get shot of, for example. So while the two networks will retain separate spectrum holdings, the pooling of infrastructure will have an impact on the market.

In the more immediate future there will be some disruption to customers as cell sites are switched off, even if the slack is swiftly taken up by other phone masts.

Customers hate change and while this will lead to a cheaper and better network in three years, for O2 and Vodafone customers, there will be a period of transition very similar to that already experienced by customers of all the other UK networks. ®

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