Vodafone and O2 get go-ahead for UK network merger

UK mobile operators Vodafone and O2 have been given the green light to merge parts of their network infrastructure into one national grid, in an attempt to speed up the delivery of 4G services in the UK.

The two companies said on Friday that they have been granted permission by the Office of Fair Trading (OFT) and Ofcom to consolidate their cell sites across the country, and manage them through a joint venture called CTI Ltd.

Under the terms of the partnership, both companies will continue to run competing mobile internet and voice networks, and will retain control of their wireless spectrum, core networks and customer data.

However, by sharing their existing basic network infrastructure, including towers and masts, both companies will have access to a single grid of 18,500 masts, representing an increase in sites of more than 40% for each operator.

The companies claim that the deal will allow them not only to offer indoor 2G and 3G coverage to 98% of the UK population by 2015, but also deliver a nationwide 4G service faster than could be achieved independently.

“One physical grid, running independent networks, will mean broader coverage and, crucially, investment in innovation and better competition for the customer,” said Ronan Dunne, CEO Telefónica UK, (which trades as O2).

Eventually each operator will take the responsibility for design, management and maintenance of infrastructure in one half of the country. Telefónica will manage the network in the east of England, Scotland and Northern Ireland, and Vodafone in the west of England and Wales.

The deal builds on an existing network partnership between the two companies, known as Cornerstone. All shared sites will continue to carry Telefónica UK’s traffic on Telefónica’s spectrum and Vodafone UK’s traffic on Vodafone’s spectrum.

The news comes as rival UK operator EE (the combined entity of Orange and T-Mobile) begins testing its own 4G network, in preparation for a commercial rollout before the end of the year. The company's 4G network will be delivered using its existing spectrum at 1800MHz.

Vodafone and O2 will have to wait until after Ofcom's auction of spectrum in the 800MHz and 2.6GHz bands before launching their own 4G network, as neither operator holds sufficient quantities of 1800MHz spectrum to launch 4G services in any compelling way.

However, O2 is reportedly in discussions with Ofcom to bring the timeline of the auction forward, claiming that if EE is the only operator on the market to be selling 4G services it will attract a lot of rivals' customers.