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MmO2 deal paves the way for price cuts
Tuesday, April 16 2002
by Sheila McDonald


A major EUR2.2 billion project by mmO2 to build one mobile network linking
Ireland, the UK, Netherlands and Germany could slash mobile charges in those
areas.

MmO2, which wholly owns its mobile networks in all four countries, announced a
significant strategy change that sees it abandoning relationships with more than
15 subcontractors in those territories. Nortel and Nokia have been chosen to
build an end-to-end mobile network that will cater for fast mobile data (GPRS) as
well as an advanced third-generation (3G) mobile network that spans all four
territories, subject to O2's being granted a 3G licence in Ireland.



Nortel is to provide the core network infrastructure for GPRS and 30 percent of
the radio technology, including base stations, for the 3G network. Nokia will
also provide 30 percent of the 3G equipment, and the remaining 40 percent of the
infrastructure will be up for competitive bid between Nortel and Nokia. The total
equipment spend is EUR2.2 billion. 



"Construction will start very soon; we'll have the GPRS network by October in
all territories," an mmO2 spokesman told ElectricNews.Net. "Currently we
expect to introduce 3G in the UK and Germany in the middle of next year, and
Ireland is subject to a licence being awarded, but that will follow."



Because mmO2 will own 100 percent of its infrastructure in all four countries,
the company would have the option to totally eliminate roaming fees or
international call rates between its customers in its territories. 



Roaming fees -- the cost users pay to receive or make a call when travelling
abroad -- are set by whichever operator that is used when abroad. But under the
new deal, where mmO2 can route calls over its own wholly owned network, calls
from a Digifone customer in Ireland to a BT Cellnet customer in the UK, for
example, should cost no more than a call between two Digifone customers in
Ireland.



The spokesman declined to give details or a date when its new pricing packages
would be announced, but said these are expected later this year, and agreed that
it should be cheaper for its customers to roam. Pricing on data services,
including sending text or picture messages, could also be standardised.



"It's too early to say, but we will be looking at new pricing packages and
standardised pricing where appropriate across our footprint," he said.
"Particularly business customers, for example, may want one price across all
those countries." 



"Roaming charges are not going to disappear, but we can cut charges and it will
apply probably for new data products, for example sending a picture with a text
message. I wouldn't like to give the impression that all voice calls are going to
be slashed in price over night," he said.



On mmO2's current GSM network, Nokia currently provides about 70 percent of the
equipment and will have the opportunity to boost that percentage, the company
said. 



Also on Tuesday, mmO2 said that it would now outsource day-to-day operation of
its network in the Netherlands to Ericsson, and said it was maintaining a
"flexible approach" to setting up similar outsourcing and managed services
initiatives in its other territories.



The company said it expected "dramatic economies of scale" including a 22
percent cost saving, totalling EUR600 million over five years, on its network
expenditure. Having a single network in all countries should also make it faster
for mmO2 to roll out new products in all territories, since a device or service
can be tested once and introduced network-wide.