One-2-One on line for pounds 235m expansion

Mercury One-2-One, the operator owned by Cable & Wireless and US West, raised the stakes in the mobile telephone market last night with a pounds 235m expansion of its network.

One-2-One said the investment would give it national coverage by the end of 1997, well ahead of the previous target date of the year 2000.

The UK mobile telephony market has soared to about 4 million subscribers in recent months, dominated still by Vodafone and Cellnet. There is a widespread view that the customers will exceed 10 million by the end of the decade.

The market has been helped by fierce price competition and the more consumer-oriented approach taken by One-2-One and by Orange, the fledgling company owned by Hutchison Whampoa of Hong Kong. One-2-One caused shock waves by launching its service with free offpeak local calls - a concept it has said will remain an important part of strategy.

Mercury One-2-One has 260,000 customers, largely in the South-east and west Midlands. It declines to reveal how many of these are on the PersonalCall tariff, which includes the free calls, rather than on the more lucrative BusinessCall plan. It says that 45 per cent of subscribers are businesses, but many of those are also thought to opt for PersonalCall.

Richard Goswell, One-2-One managing director, said: "As coverage grows we will also more effectively support customers with a national need for mobile communications, in addition to the smaller business and consumer markets where One-2-One has already been a great success. We will soon be launching a range of new services specifically designed with business users in mind."

Mr Goswell has denied speculation that many of his customers use the service primarily or solely for free calls. One-2-One believes that "free call abusers" account for only about 4 per cent of its customer base.

One-2-One has already committed to spending pounds 660m on the network, largely funded by its Cable & Wireless and US West. The latest tranche will be raised as debt financed from customer revenues.

The company said that this vindicated its strategy of rolling the network out selectively rather than attempting to offer national coverage from the first day. A spokesman said: "There will be no requirement for new equity from either of the two shareholders. Operational break-even is projected for some time in 1997-98."

Ericsson of Sweden has been awarded the pounds 235m contract to act as prime contractor for the next phase.