Dec. 18 (Bloomberg) -- Deutsche Telekom AG and Hutchison Whampoa Ltd. agreed to combine their high-speed wireless networks in the U.K. to extend reach and reduce investment costs.

T-Mobile, a unit of Germany's biggest phone company, and Hutchison's 3 U.K. set up a 50-50 joint venture, called Mobile Broadband Network Ltd., to manage their shared networks, the companies said in an e-mailed statement today. Combined cost savings will reach 2 billion pounds ($4 billion) over 10 years.

The agreement will enable ``almost complete population coverage'' by the end of 2008 across Britain for so-called third- generation services, which allow Internet browsing, video conferences and music downloads, the companies said. T-Mobile is the U.K.'s second-largest mobile-phone company by subscribers after Telefonica SA's O2.

``When you collaborate you can reduce the costs,'' said Hannes Wittig, an analyst at JPMorgan Chase & Co. in London. ``Both T-Mobile and 3 have coverage issues in the U.K. and it would be sensible for them to share the costs of regional expansion. It's something you have to do to stay in the game in the U.K.''

Mobile Broadband

The deal allows the companies to accelerate their strategies of offering fast mobile broadband access at affordable prices to more consumers, they said. With the shared infrastructure the companies will be able to offer 3G services, or third-generation, to 98 percent of the U.K. market.

``3G next-generation products and services, those services that extend beyond traditional voice and text, are where the lion's share of our interest in growth will be,'' Jim Hyde, head of T-Mobile U.K., said on a conference call with reporters.

The network-sharing agreement between T-Mobile and 3, which runs to the end of 2031, follows similar deals in recent months with other operators.

Vodafone Group Plc, the world's biggest mobile-phone company, and Telecom Italia SpA said in November they would share mobile network access sites to use their infrastructure more efficiently.

T-Mobile had 17 million customers in the U.K. at the end of September, making it Deutsche Telekom's third-largest wireless market by subscribers after Germany and the U.S. T-Mobile International had almost 114 million users across 11 European countries and the U.S.

The U.K. wireless unit of Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka-shing, had 4.1 million customers in the U.K. at the end of August. The company runs wireless operations in Australia, Austria, Denmark, Hong Kong, Ireland, Israel, Italy and Sweden.

Networking Equipment

Kevin Russell, chief executive officer of 3 U.K., told reporters that both companies will save costs on 3G equipment, including towers and networking equipment made by companies such as Ericsson AB, Nokia Siemens Network and NEC Corp.

``There's a good opportunity for both parties to really squeeze the site rental market a bit more,'' Russell said.

About 5,000 mobile-phone towers where coverage overlaps will be taken down and some will be put up elsewhere to expand coverage, the companies said.

When asked whether the joint venture was part of plans for an acquisition of 3 or a partnership, Russell said, ``there have been no merger talks, no acquisition talks between T-Mobile and 3 in the U.K. marketplace.''

``I don't foresee there will be going forward either,'' Russell said.

The deal between T-Mobile and 3 makes it less likely that 3 will get bought by another U.K. operator, said JPMorgan's Wittig.

``The deal makes Hutchison more profitable as a consequence and thus delays market consolidation,'' said JPMorgan's Wittig.

Biggest Division

Third-quarter revenue at the T-Mobile U.K. unit rose 7.4 percent to 1.25 billion euros ($1.8 billion), and adjusted earnings before interest, taxes, depreciation and amortization climbed 12 percent to 365 million euros.

Almost 77 percent of T-Mobile's U.K. customers prepay for blocks of calling time instead of taking out monthly contracts. Those prepaid-card users on average spent 15 euros a month during the third quarter, compared with 68 euros for contract clients.

T-Mobile International is Deutsche Telekom's largest division and accounted for 54 percent of the former monopoly's net revenue in the first nine months. Under Chief Executive Officer Rene Obermann, Deutsche Telekom this year acquired France Telecom SA's Orange wireless unit in the Netherlands and agreed to buy SunCom Wireless Holdings Inc. of the U.S.

Hutchison, which operates businesses ranging from telecommunications, energy, ports, retail and property, rose 0.7 percent to HK$87.40 on the Hong Kong exchange at 3:32 p.m.

A venture between Hutchison's 3 Italia SpA unit and Wind Telecomunicazioni SpA that owns the two Italian wireless companies' radio transmission towers may sell a stake to investors in the first quarter, Wind's controlling shareholder, Naguib Sawiris, said last month.

The venture received ``several bids'' from potential investors, Sawiris said.

To contact the reporters on this story: Alex Armitage in London at aarmitage@bloomberg.net; Kenneth Wong in Berlin at kwong11@bloomberg.net

Last Updated: December 18, 2007 07:16 EST