BT mulling re-entry to mobile market with T-Mobile and 3

by Caroline Gabriel, ReThink Wireless

UK incumbent BT is widely reported to be considering a return to the consumer mobile market, which it quit in 2001 when it spun off its Cellnet arm, now O2.

Although the company has an MVNO deal with Vodafone and does significant business in mobile enterprise services, it is now said to be in talks with T-Mobile and 3 UK about a potential three-way joint venture.

According to City sources and reports in The Observer newspaper, the three carriers have already held ‘informal talks’ about how such a deal would work in terms of branding, revenue share and costs. The possible plans are part of a broad review of mobile strategy ordered by new CEO Ian Livingston.

Such an agreement might be an alternative to BT re-entering the mobile world directly by acquiring spectrum in the upcoming 2.6GHz auction, set for later this year, and potentially in a future sale of 700MHz broadcast spectrum. BT has spent years weighing up the pros and cons of becoming a license holder again, and has carried out various trials of WiMAX technology, which it would be widely expected to deploy if it acquired 2.6GHz frequencies.

However, it seemed unlikely that the fixed line leader would use such spectrum to go head to head with the five 3G operators in a conventional wide area mobile business, given the extreme competitiveness of the UK market – and more probable that it would adopt new-style business models geared to business services, open access and wholesale provision for smaller service providers.

Such a route would not necessarily be mutually exclusive with a T-Mobile/3 MVNO deal, though it makes a BT bid for 2.6GHz less likely, which could be a blow for WiMAX and for the UK government’s hopes of making a healthy sum from licenses despite the downturn. The price operators will pay for these licenses is already under question because some existing cellocs are wondering whether their need for 2.6GHz will be reduced assuming they are allowed to refarm their GSM spectrum for data services.

Whether it becomes a new look wholesale WiMAX mobile broadband operator, and/or an MVNO, BT does need to grab a stronger position in the cellular world, faced with huge price competition in fixed broadband – including from cellcos like O2 – and rising fixed mobile substitution for voice and even data.

To date, most of BT’s efforts have focused on using Wi-Fi (and potentially WiMAX) for fixed/mobile convergence, with extensive hotspot activities and the Fusion service, which had limited consumer success and has now been rebranded BT Total Broadband Anywhere.

BT has already drawn closer to the 3G operators through its position as managed services and backhaul provider to four of the cellcos, including the T-Mobile/3 UK RAN sharing venture, Mobile Broadband Network Limited (MBNL).

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