July 14 (Bloomberg) -- Vodafone Group Plc agreed to share its wireless infrastructure with Hutchison Whampoa Ltd. in Ireland as the companies seek to reduce costs.
Vodafone and Hutchison’s Three Ireland unit will combine their mobile-phone networks in about 2,000 locations, eliminating duplicate sites, the companies said in a statement yesterday. The joint venture will be responsible for purchasing equipment and maintaining the sites.
Vodafone and Hutchison said that the partnership will free cash for expanding into new technologies, such as fourth-generation high-speed mobile data networks. Vodafone, based in Newbury, England, has a similar agreement with Telefonica SA’s O2 unit in the U.K. European operators are increasingly relying on network sharing deals to lower costs after regulators blocked some merger and takeover attempts.
“Securing future investment for technologies in a competitive market is critical to maintaining a sustainable business,” said Jeroen Hoencamp, CEO of Vodafone Ireland.
In Ireland, former monopoly Eircom Group and O2 signed a mobile network sharing partnership last year. Hutchison this year unsuccessfully submitted two separate bids to buy Eircom.
Vodafone’s American depositary receipts rose 1.4 percent to close at $28.59 yesterday. Each ADR represents 10 common shares. The ADRs of Hutchison, the Hong Kong-based company owned by billionaire Li Ka-Shing, rose 2.2 percent to $17.85. Each ADR represents two common shares.
Hutchison agreed to acquire Orange Austria in February in a deal valued at 1.3 billion euros ($1.6 billion). Hutchison plans to merge its Austrian Three unit with Orange, making it the country’s third-biggest mobile provider after Telekom Austria AG and Deutsche Telekom AG’s T-Mobile Austria business. On June 29, the European Commission opened a full antitrust probe of the deal.
The average European operator will spend about 2 billion euros to upgrade an existing network to fourth-generation network technology to cover 75 percent of a country with 50 million people, according to researcher Idate. Spending could be three times as expensive for an operator starting from scratch, it said.
Companies that share infrastructure can cut their costs by as much as 40 percent per site, France Telecom SA’s head of European network performance, Christian Luginbuhl, said this year. Luginbuhl spoke after France Telecom announced that it would team up with Deutsche Telekom to share networks in Poland and prepare them for an upgrade to 4G.
In the U.K., France Telecom merged its Orange network with Deutsche Telekom’s T-Mobile in 2010, creating Everything Everywhere in a bid to save more than a total of 4 billion euros in network, marketing and administrative costs by 2014. That deal, cutting the number of network operators in the country from five to four, paved the way for joint procurement projects and network sharing across all their markets.
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