Deutsche Telekom and France Télécom will shop together

Large investments and pressure on tariffs force operators to think outside of the box

Deutsche Telekom and France Télécom are joining forces to increase their collective buying power, and negotiate better deals on mobile networks and smartphones. The two network operators will pass some of the savings they hope to realize on to their customers, they said Monday.

The two companies have agreed to form a joint venture later this year to buy smartphones and equipment for their respective mobile networks. At a later stage, they will also buy hardware and software for their internal IT infrastructures, beginning with pilot projects for servers and storage. Between them, the companies expect to save around €1.3 billion (US$1.9 billion) per year after three years through economies of scale and operational synergies.

Savings passed on to subscribers could come in the shape of lower tariffs and cheaper smartphones, but it is too soon to announce any details, the two said during a conference call.

The joint venture is an example of how mobile network operators are looking for ways to cut costs as they face increasing pressure on tariffs and the need for big investments in technologies such as LTE (Long-Term Evolution) network infrastructure . Deutsche Telekom expects operators will invest more than ever in networks and infrastructure as data usage continues to increase and mobile networks are expanded to offer broadband service in rural areas.

Winning deals with the joint venture will be more important for network equipment and smartphone vendors. Before, if a vendor lost a bid for Deutsche Telekom's business, it could still bid for Orange's. Now such deals could become all or nothing, increasing price pressure on vendors.

This isn't the first time Deutsche Telekom and France Télécom have worked together. In September 2009, the two operators pooled their U.K. mobile networks in a joint venture called Everything Everywhere. In February this year they announced plans to find new areas of cooperation, including radio access network sharing in Europe, Wi-Fi roaming and machine-to-machine (M2M) services. The purchasing joint venture, which will have offices in Bonn and Paris, is the latest fruit of those plans.

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Tags business issuesCarrierstelecommunicationFrance Télécomdeutsche telekom

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Mikael Ricknäs

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