BT returns to mobile phone business with EE deal

More than 10 years after selling off O2 network, BT to offer 4G smartphone connections bundled with broadband, landline calls and pay TV in bid for edge over BSkyB

BT is back in the consumer mobile phone business after signing a partnership deal with EE under which the former national monopoly will return to wireless, more than a decade after it sold off the O2 network.

From next year, by renting space on EE's masts, BT will be able to offer its customers 4G smartphone connections bundled with broadband, landline calls and pay television. By mirroring the Virgin Media model, BT could gain an edge over BSkyB, which does not offer mobile.

BT once owned Cellnet in the UK, and wireless businesses in Germany, Ireland and the Netherlands. In 2001 it became one of the few big European national telecoms groups to pull out of mobile when Cellnet was rebranded O2 and spun off as a separately listed company. Since then BT has made several limited attempts to sell mobile connections, most recently to businesses in partnership with Vodafone.

Now it is planning a comeback. After splashing out on Premier League football rights for its sports channels, BT spent nearly £190m buying spectrum in February's 4G auction. The group wants to build what its former chief executive Ian Livingston labelled an "inside-out" mobile network, connecting smartphones through Wi-Fi in living rooms, cafes, airports or railway stations, and through more conventional mobile masts when outdoors.

EE and BT have agreed to negotiate on an exclusive basis. The result will be a multi-year alliance, starting in 2014, which will end BT's deal with Vodafone. The decision is a surprise, with O2 originally considered the frontrunner to win the work. Initially, BT will test the network on its 88,000 staff worldwide, who will transfer on to EE's network. After that, offers will be rolled out to consumers.

"We are excited about this partnership with EE as it will give us lots of options both in the business and consumer markets," BT said. "BT already operates the UK's largest Wi-Fi network with more than 5m hotspots, and we are keen to build on that platform. Broadband speeds are improving all the time with fibre and 4G and we want our customers to enjoy the fastest speeds possible, whether they are in the home, office or out and about."

With the spectrum used for Wi-Fi increasingly overwhelmed by the surge in traffic from smartphones, laptops and tablets, BT has suggested it will adapt its Home Hub routers to transmit 4G indoors. BT cells could also pick up the 4G signal in offices and university campuses, and small radios could transmit from lamp-posts.

For a wider range signal, BT will rely on EE. It could either install its own radios on EE's masts, or the companies could share equipment. Both own spectrum in the 2600MHz band, making a sharing arrangement possible.

"It is very much an inside-out network, and that makes us different from other providers," Livingston told investors in May. "Mobile network operators are doing outside-in, and that's great and that's fine. But people tend to use their device for more high intensity downloads when they're on the pause, when they're indoors. And we think that presents a great opportunity to combine Wi-Fi, to combine 4G and give basically the best connection when you're sitting down, when you're in your home, when you're in your business, when you're in a train station, when you're in the airport."

BT has made previous attempts to break back into mobile. In 2003 it marketed a plan for families with up to six handsets on one bill. Two years later it unveiled the Bluephone, also known as BT Fusion, which made calls at landline rates while at home but ran on mobile networks outside.


Juliette Garside, telecoms correspondent

The GuardianTramp

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