O2 UK and Vodafone UK are in advanced talks over a landmark network-sharing agreement, reports the Financial Times (FT), citing people familiar with the situation. The report adds that another UK operator, Orange, is also looking to join the existing UK network sharing partnership between T-Mobile and 3. If true, the deals would mean that all five UK mobile operators could potentially end up sharing just two networks. According to the FT, O2 and Vodafone are discussing sharing mobile towers and network equipment such as base stations, and are also looking at sharing spectrum. Both operators hinted that they were looking at network sharing as a way to make capital and operational savings. “We regularly review our plans to ensure Vodafone UK is best placed to take advantage of network sharing schemes now and in the future,” said Vodafone UK. O2 UK added that, “there are cost efficiencies but at the same time we must ensure the customer experience is not impacted.”

The FT added that the developments could also solve a long-running dispute among the UK operators over spectrum, following UK regulator Ofcom’s order that O2 UK and Vodafone UK transfer some of their 900MHz spectrum to rivals for mobile broadband use, a proposal reportedly strongly opposed by O2 and Vodafone. However, the FT said that a network sharing deal might allow O2 and Vodafone to pool their remaining 900MHz spectrum in order to offer mobile broadband in remote areas. Rural mobile broadband forms an important part of the UK government’s recent ‘Digital Britain’ initiative, which is aiming for every UK household to have access to broadband by 2012. “The Digital Britain report… has thrown up a number of questions, opportunities and avenues that we are currently exploring, which could see us open up additional bilateral or multilateral partnerships with other operators in the future,” Orange UK said. A separate report in The Guardian said that the UK’s Competition Commission and the Office of Fair Trading are expected to scrutinise the network sharing deals to see if they amounted to a merger that would reduce competition. The existing network sharing venture between T-Mobile UK and 3 UK – a 50/50 joint venture known as Mobile Broadband Network Ltd. (MBNL) – was formed last year and is aiming to build a shared 3G network that would provide near complete UK population coverage by the end of 2009.