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EC OKs German 3G Net Sharing

The European Commission will tomorrow formally approve the sharing of third-generation wireless networks in Germany between mmO2 plc and T-Mobile International AG. Analysts predict the move will greatly reduce the carriers' initial infrastructure costs and will have a significant impact on the timescale of 3G deployment in the country, which is the largest wireless market in Europe.

The approval follows previous backing for a similar scheme in the U.K. that allows the sharing of basic W-CDMA infrastructure such as base stations, masts, and power supplies (see EU OKs UK 3G Network Sharing).

“The decision will be taken tomorrow,” says Tilman Lüder, spokesman for Competition Commissioner Mario Monti. “If nobody has any remarks to make by 11 a.m. tomorrow, the formal procedure will be put in place. It’s almost unavoidable now.”

According to local legislation, German UMTS license holders are required to have networks in place covering 25 percent of the population by the end of this year.

Analysts believe the move will greatly improve the two carriers’ chances of hitting such targets. “The greatest benefits are being able to roll out networks much quicker and the cost savings involved,” says IDC senior analyst Paolo Pescatore. “Both of these factors will affect the growth of the industry in general.”

Ovum Ltd.’s Jeremy Green, meanwhile, says the two carriers could save up to 35 percent of cumulative capital expenditure “in the early years.”

The financial community is also playing down fears that the deal will have a negative impact on the two primary vendors supplying W-CDMA equipment to both mmO2 and T-Mobile - Nortel Networks Corp. and Nokia Corp..

“Although the sharing of infrastructure delays demand for equipment in the short term, it doesn’t affect the overall level of demand per se,” comments Nomura Holdings Inc.'s Dr Richard Windsor. “In the initial stages carriers can save a fortune as less capacity has to be provided, but as traffic takes off carriers will have to ramp up capacity, and there is no real economic benefit in sharing networks at that point in time.”

Windsor therefore expects both carriers to eventually “disentangle their networks” and focus on their own infrastructure rollouts once demand for 3G improves.

Nortel itself echoes such sentiment. “We have always taken a positive, proactive approach to network sharing and welcome the EC’s decision,” says company spokeswoman Claire Cranton. “It has very little impact on the bottom line, as we expect carriers to reinvest in their own equipment once the 3G networks are up and running.”

— Justin Springham, Senior Editor, Europe, Unstrung

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