BT spin-off mmO2 hopes to have third-generation (3G) mobile services in place by the end of next year, thanks to a cost-sharing deal with Deutsche Telekom's T-Mobile wireless arm.

The agreement will see the two companies collaborate on building and using 3G networks in the UK and Germany.

mmO2 expects capital expenditure savings of about £1.3bn over the next 10 years as a result of the deal.

UK resources will be shared between BT Cellnet and network rival One 2 One, owned by Deutsche Telekom. The German network will be run by Deutsche Telekom and mmO2's Viag Interkom.

The two companies are already working together to upgrade masts in the UK, and the first commercial 3G services should be available at the end of 2002.

"It will be a gradual rollout from the end of 2002, and we plan to meet the licence conditions and have 80 per cent of the UK population covered by 2007," said an mmO2 spokesman.

The Deutsche Telekom deal is an important step towards that target, and a wider area will be covered sooner than if mm02 had gone it alone, he said.

Some 40 per cent of sites will be extended to include two separate masts, while at the remainder the companies will share technology and 'roam' across each other's networks.

"This means we can build out the network and reach the population a lot quicker, and the environmental impact will be limited because there will be fewer masts," claimed mmO2's spokesman.

Sales of 3G-enabled access devices are expected to pick up over the next year, starting with dual-mode handsets working on both existing and 3G networks.