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E-Plus, the German mobile unit of Dutch operator KPN, is to outsource the running of its network to Alcatel-Lucent, the French-US telecoms equipment group, in the first deal of its kind in Germany.
FT Deutschland, the FT’s sister paper, has learned that the supervisory board of Düsseldorf-based E-Plus decided to go ahead with the move at a board meeting Monday evening.
People familiar with the deal told the paper that Ericsson and Nokia had also bid to manage the network, but that Alcatel-Lucent had made the best offer.
The deal, estimated by experts to be worth about €1.5bn ($1.97bn), could save E-Plus 20 per cent in the cost of running the network, company insiders said.
“Mobile phone operators offer a standardised mass product,” Thorsten Dirks, E-Plus’ chief executive, told FT Deutschland. “No company is able to distinguish itself with a network alone. The difference is the price, for both provider and customer.”
The handover is to take place on March 1, with 750 E-Plus employees expected to switch from the mobile phone operator to Alcatel-Lucent.
Under the framework discussed at Monday’s meeting, the actual network assets, such as sending units and masts, would remain in E-Plus ownership, while Alcatel-Lucent would be responsible for the control and maintenance of the network, as well as the construction of any further sending masts. The arrangement enables E-Plus to concentrate on product development and sales.
The contract between the two companies runs for three years initially.
The move could put pressure on E-Plus’ domestic competitors to cut their operational costs as well. The company intends to achieve the lowest operational costs in the sector in order to pass on cost-savings to its customers.
“Other market participants will have to follow us in the next two or three years,” said Mr Dirks.
However, domestic competitors such as Vodafone and T-Mobile argue that by running their own networks they are able to provide better network quality.
E-Plus said that Alcatel-Lucent had agreed to adhere to certain “quality standards” in the running of the network.
The deal follows similar moves elsewhere in Europe. Dutch mobile operator Telfort outsourced the running of its network to Ericsson in 2002. Mobistar in Belgium and 3 in Italy have also recently decided to outsource the management of their networks.
People familiar with the sector think that O2, a subsidiary of Spanish group Telefonica, could be next, as Rudolf Gröger, chief executive, is said to have considered the move in the past.