BT and Vodafone converge on Bluephone

Users could soon be clutching a dual-mode handset that connects over Bluetooth at home and switches to GSM or 3G when it's out and about

BT has teamed up with Vodafone for business and consumer mobile services, replacing respectively mmO2 and T-Mobile.

BT took the mobile virtual network operator (MVNO) route after exiting the business when mmO2 was spun off in 2001.

At the same time, this week there is speculation that AT&T Wireless will be recast in the US as an MVNO using Sprint's network. AT&T Wireless' assets - including its infrastructure and customers - were sold to GSM operator Cingular in a $47bn deal in February this year. However, the company gets to hold on to its valuable brand.

Back in the UK, BT said that with its new partner it will work on converged fixed and mobile services "never seen before in the UK".

One such initiative has been dubbed Project Bluephone. A consortium of seven vendors, led by Alcatel and including Ericsson and Motorola, will work towards a single handset with a single number for end users for voice and data access.

Trials are going on at the moment - though the companies involved stress the technology is proven - with the goal of a full launch by year's end.

BT said it hopes to generate £1bn in annual mobility and convergence revenues in five years' time based on the Vodafone partnership, despite take up of its BT Mobile service failing to live up to previous forecasts from the time of its launch.

Analyst house Ovum called the deal and Project Bluephone "huge news for BT's future revenues, partners and customers", as it is an attempt to stem declines in fixed-line sales. Its full-year results are out this Thursday.

The UK's best-known MVNO, Virgin Mobile, is thought to be preparing for a possible flotation and related image makeover this year. It also operates in the US by piggy-backing on Sprint's network.

Meanwhile O2, the UK arm of the mobile business BT spun off, announced healthy 16.3 per cent full-year revenue growth for 2003/4 with Ebitda profit growing 24.2 per cent year-on-year to £1.04bn.