ANALYSIS - Vodafone Airtouch deal sets the tone for a wireless future.

The creation of the world's largest mobile group, Vodafone AirTouch, has given the clearest signal yet that the future of communications will be mobile.

Wireless communications has traditionally come in for a great deal of criticism over issues of poor quality and expensive tariffs, but Vodafone has made this acquisition confident that mobile will replace fixed as the phone of choice.

"We are certain we have the technical and managerial capacity to handle the traffic volumes and reduce prices to make this possible," said Chris Gent, chief executive of Vodafone and now of the enlarged group.

The combined operation is the first truly global mobile operator capable of bringing the benefits of mobile business solutions to multinational corporations (Bringing order to chaos, Network News, 13 January 1999).

"We share a vision of mobile communications as the principal platform for voice and data comms into the next century," said Gent.

He has predicted that by 2003 the combined $110bn (#67bn) company, described as the 'Microsoft of mobile phones', will have an estimated 40 million subscribers throughout the world.

"Vodafone AirTouch will have the size and financial resources to take advantage of future opportunities, making the company a leading force not only within wireless but throughout the telecoms industry," said Sam Ginn, chief executive of AirTouch.

Headquartered in Newbury, Vodafone AirTouch will operate in 23 countries, with a particularly strong presence in Europe. Between them, the operators have stakes in the major mobile networks in Germany, France, Italy, Spain, the Netherlands, Belgium and Greece.

In fact, the first effects of the deal will be felt in Europe, where the combined assets of Vodafone and AirTouch come close to creating a pan-European mobile network. This level of reach means the operator will prove very popular with the business market operating across Europe's increasingly integrated single market.

"The European market is a good deal for both companies, because they can put a pan-European service together and offer a more consistent face, particularly for corporate customers," said Elaine Axby, senior consultant at Schema in London.

European mobile users could also see call charges fall as the operators will avoid some of the interconnect charges they face from handling each other's traffic, said Patrick Donegan, analyst at the Yankee Group Europe in Watford.

Vodafone AirTouch will also be able to introduce harmonised access to different services in Europe, such as voicemail, that are sometimes difficult through existing roaming arrangements, said Donegan.

Outside Europe, Vodafone has interests in Australia, New Zealand, Egypt, Fiji, South Africa and Uganda. AirTouch has around 12 million customers in the US and has interests in Egypt, India, Japan and South Korea. Both companies have an interest in the Globalstar satellite communications system.

Third-generation mobile standards (UMTS), being developed to enable more sophisticated mobile phone handsets and networks, are also likely to benefit from the union, analysts said.

When licences for UMTS operators are offered in Europe later this year, Vodafone AirTouch will be in a position to bid for licences in most countries. "They have an excellent opportunity for creating a pan-European UMTS network," said Donegan.

Mobile phones have already become a standard business tool. With the high-tech advances for accessing voice and data that UMTS will bring, Vodafone is well-positioned to be a key player in the global wireless business.