Ericsson will help fund the network, giving MobilCom financial flexibility. In September, MobilCom paid $7.2 billion (8.5 billion euros) for a mobile phone license, called a UMTS, in Germany. Analysts say arrangements, such as the Ericsson-MobilCom plan, will be used to build faster mobile phone networks throughout Europe.
Stockholm-based Ericsson will supply MobilCom with equipment, handsets and services, said MobilCom chief executive Gerhard Franz Schmid. The German company will pay Ericsson $1.35 billion in 2003, he said. Ericsson faces penalties if it fails to deliver on time.
"We've set up the time frame in such a way that nobody else will be able to finish their networks faster," Schmid said. "The penalties are so heavy that if the work isn't done in a certain time period, we won't pay for what's been delivered."
MobilCom, which is partly owned by France Telecom, expects to have the network running by the middle of 2002. The company expects customers to pay as much as $71.50 a month for phone calls and other services available on the network.
Ericsson said it has won 16 out of the 21 contracts to build systems that offer faster data transmission to mobile phones awarded so far. The Swedish company cut its full-year profitability forecast Friday because of losses in its mobile phone handset unit.