Following the news earlier in the week that BT and DT were intending to share 3G network costs in Germany and the UK, an S&P analyst has claimed that such agreements could be "detrimental to the industry."

The deal between the two operators will see BT Cellnet working with One2One and DT's T-Mobil in Germany working with Viag Interkom. Former BT Wireless CEO Peter Erskine said the deal would save BT EUR 2bn over the next 10 years. Erskine has just been replaced with the former CEO of British Gas, David Varney. It has been said that the deal between the two is non-exclusive and BT confirmed that it could form similar alliances with other European telecoms companies. Both operators were confident that their national regulators were happy with the deal. Although the supra-national regaultor, the EU, has said that it is less than thrilled about this. A spokesman from the EU said: "We will look at the issues case by case with our lawyers. When rival companies join forces, it can lead to a restriction on competition."

Subhajit Gupta, a senior telecoms analyst at S&P Equity Research claimed that 3G network sharing agreements will be will enable the small players to battle more intensively for a stake in the market. Gupta argued that this competition will mean that the cost savings will be passed on to the consumer in the form of lower charges and subsidies, rather than flowing into increased profitability for the operators. The detriment to the industry would be that, Gupta claimed, network sharing will provide a short-term lifeline for sub-scale operators, thereby increasing costs long-term and delaying inevitable consolidation in the sector.

However, a new report released this week by Analysys has said that network sharing by operators will be essential to the success of 3G, as it could cut up to one third off the massive capital expenditure required. David Wilkins, co-author of the report, said: "The savings could be significant - as much as 38 per cent of the capital expenditure and 14 per cent of operating costs if two operators share network assets. I believe that network sharing is essential for the success of 3G."

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last updated: January 12, 2004

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