BT Piggybacks T-Mobile

Crusty old incumbent British Telecommunications plc (BT) (NYSE: BTY; London: BTA) is expected to further its wireless ventures next week through a partnership with T-Mobile (UK). T-Mobile will act as a virtual network operator (MVNO) for BT, enabling the British behemoth to offer its own brand of converged fixed and mobile services over the T-Mobile network.

T-Mobile already provides a similar service for Virgin Mobile Telecoms Ltd. in the U.K.

The deal is the result of a network partnership struck between the two carriers in February. “From our point of view it is a wholesale agreement,” explains T-Mobile spokeswoman Alison Enticknap. “We are providing them with the network capacity and the infrastructure to provide the service.”

Both parties are keeping tight-lipped over specific details, but BT spokesman Jonathan Carter expects an announcement “by the end of the month.” [Ed note: So next week, then.] He forecasts commercial service to go live “around autumn time,” with a marketing assault launched in October.

Analysts believe the deal is a natural progression for the incumbent, following recent efforts to reassert itself in the U.K. mobile market after its separation from mmO2 plc in 2001. The company has already launched an aggressive public wireless LAN rollout, as well as a low-key, Mobile Sense consumer offering using mmO2’s network (see BT's Blind Ambition? and BT Offers Mobile Sense).

“Mobility is a major strategy of theirs, so this is not unexpected,” comments Phil Kendall, director of global wireless practice at Strategy Analytics Inc. “Its deal with mmO2 meant it was really only an enhanced dealer for its former subsidiary, and it wasn’t seeing real revenue from the offering. The T-Mobile deal sees it getting back in a bigger way on the revenue side.”

“I know they want to move from being a reseller to a virtual operator,” adds Ovum Ltd. chief analyst Julian Hewitt. “They are keen to drive mobile traffic onto their fixed network, and want to go as far as they can without actually owning the base stations and infrastructure.”

Gartner Inc.’s principal analyst Jason Chapman points to the particular advantages T-Mobile’s GSM network has over rival offerings. “T-Mobile has greater subscriber capacity than the likes of mmO2 and Vodafone Group plc (NYSE: VOD) because it operates in the 18OOMHz band rather than 900,” he explains. "Virgin Mobile is already utilizing T-Mobile’s spare capacity, so another MVNO would be a further financial benefit to it.”

The two companies are no strangers to one another. Last week BT won a two-year £15 million ($24 million) contract to supply T-Mobile’s 12.4 million U.K. users with directory inquiries services.

— Justin Springham, Senior Editor, Europe, Unstrung

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