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Cash injection fuels O2 fire-up

BT nets £3.5bn from big banks for 3G investment

BT Wireless is to announce this week it has secured a £3.5bn loan from six major high street banks, including HSBC, Barclays and The Royal Bank of Scotland, to fund the development of its 3G (third generation) mobile network.

BT Wireless, which is being rebranded as O2, is set to demerge from BT in November but will carry £500m of its parent company's debt. This is less than many analysts had predicted.

The company refused to comment on the loan until an official statement is released and would not give any indications of the repayment timescales it would be working to.

But in an internal report leaked last week, which BT refused to comment on, the company allegedly expressed its concerns over the success of 3G, which chimes oddly with this move, which would seem to indicate BT Wireless' belief in 3G's long term success.

The £3.5bn loan will give BT some money to play with, and it will need it. The high costs involved in building 3G networks and investing in their technologies has left most mobile companies in debt.

Even industry chiefs such as Intel's top man Craig Barrett have warned that 3G systems could be made almost redundant by the development of interim technologies such as GPRS (general packet radio service).

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