T-Mobile has clarified its policy on mobile data use after anger from its customers. The company initially said that it would slash the amount of data all of its customers could use to 500 MB.
T-Mobile and 3 are pooling their 3G mobile phone networks in a move to bring wireless broadband to 98% of the UK population and save £2bn over the next decade by cutting out 5,000 phone masts.
Both sides denied that the deal, confirmed Tuesday, is a precursor to a full-scale merger of the UK’s fourth and fifth placed networks. But the strength of their agreement marks a tacit admission by 3’s owner, Hutchison Whampoa, that it is unlikely to find a buyer for some time.
Kevin Russell, 3’s UK chief executive, said the joint venture deal includes contingencies should either company be taken over, but both expect it to be a long relationship.
“It’s a marriage but it’s deeper than a marriage and, dare I say, far harder to break up than a marriage,” he said. While “the sexy stuff is equity consolidation, I think that is currently unrealistic in the UK market”, he added. Instead companies will look to asset consolidation, pooling resources to cut out costs.
“This is a major change in how mobile networks are built and run,” added T-Mobile UK chief executive Jim Hyde. “In terms of consolidation (going forward) this has nothing to do with that, this has to do with combining our two networks together. It’s the right thing for us to do … to accelerate our mobile broadband proposition.”
Both companies spent billions during the dotcom boom buying licences to offer 3G services, but the technology has so far failed to reach a mass market, not least because the first handsets available were unattractively clunky.
In the UK, T-Mobile has just a million active 3G customers among its 12.5m users, despite having launched the service almost two years ago. All of 3’s 3 million customers are on its existing 3G network although usage of services other than voice calls and texting is disappointingly low.
The first generation of 3G technology also failed to deliver the super-fast speeds that were originally promised, coming in at a fraction of the speed available over fixed-line broadband connections. As a result both companies have been investing in new HSDPA technology to get faster access.
By the end of 2009 the two companies plan to have 13,000 sites, covering 98% of the population with a mobile broadband network capable of speeds up to 7.2 MB per second – or nearly twice the current average residential broadband speed and nearly twenty times faster than existing 3G services. T-Mobile’s 3G network currently covers about 85% of the UK population while 3’s covers about 90%. That, however, leaves massive geographic gaps, many of which will be plugged by the joint venture.
3 UK’s Russell said the promise of the mobile internet is now starting to arrive as customers start to do more with their phones than merely make calls and send texts. New gadgets such as Apple’s iPhone have also helped to make the mobile internet easier to use – although the current handset, exclusive to O2, is not compatible with 3G networks.
While rivals O2, Vodafone and Orange are all offering residential broadband services over existing phone lines, the network sharing deal has strengthened the resolve of both 3 and T-Mobile not to get involved in the fixed line market.
“We believe mobile broadband will become the dominant connection to the internet for everyone,” said Hyde.
“We have no intention” to offer fixed line services, added Russell.
Hyde added that no jobs will go as a result of the deal. Both companies have already outsourced some network jobs to Ericsson.
The joint venture agreement extends to 2031 – 10 years longer than the 3G licences owned by T-Mobile and 3. Both companies expect those licences to be extended but the network deal may also extend into the next generation of mobile network technology, called Long Term Evolution (LTE).
Having a bigger network will reduce 3’s need to use Orange’s 2G network to fill in the gaps. Its deal with the company, owned by France Telecom, runs until 2010 but 3 expects to make less and less use of the Orange network as its deal with T-Mobile rolls out.
The £2bn cost savings are divided equally between both companies and between capital expenditure savings – as both companies will need to acquire fewer sites – and operating expenses – as they will be pooling existing sites.