The three companies are planning to take a slice of Europe's mobile phone market by pooling resources to throw down the gauntlet to existing telecom giants like Vodafone Airtouch.

You're seeing consolidation being played out across Europe because everyone is trying to play catch-up with Vodafone Airtouch

Richard Ferguson, telecoms analyst

They hope the alliance will generate �125bn of business within 10 years.

Only a few heavyweights are likely to have the muscle to win the rights to establish pan-European 3G mobile phone businesses: Vodafone Airtouch, Hutchison/DoCoMo/KPN, France Telecom/Orange, Deutsche Telekom and possibly BT.

"You're seeing consolidation being played out across Europe because everyone is trying to play catch-up with Vodafone Airtouch," said Richard Ferguson, analyst with Nomura Securities.

Alliance

Under the new deal, Hutchison is selling a 20% stake in its UK 3G mobile phone operation to NTT DoCoMo for �1.2bn and a 15% stake to KPN for �900m.

It says it will form a new consortium with KPN, to be called E-Plus, to bid for a German UMTS (Universal Mobile Telecommunications System) licence.

In France, Hutchison, NTT DoCoMo and KPN will work together in the UMTS auction. Talks are said to be under way with possible strategic partners.

Hutchison and KPN will also make a joint bid in the Belgian auction and a possible bid for an Italian licence is under discussion.

Further to the three-way alliance, NTT DoCoMo is paying about �2.5bn for a 15% stake in KPN.

KPN executive board member Joop Drechsel said: "It is an exciting day for all three of us.

"It's a deal in four countries with more than 200 million people and it's all aimed at 3G positions in mobile."

Bid bonanza

UK auction result

Licence A: TIW �4.38bn Licence B: Vodafone Airtouch �5.96bn Licence C: BT �4.03bn Licence D: One2One �4.003bn Licence E: Orange �4.095bn

The scramble for UK 3G mobile phone licences raised a huge �22.5bn for the government.

All four of the UK's established operators - Vodafone Airtouch, BT, Orange and One2One - secured a licence, along with Canadian-based company TIW, which was backed by Hutchison Whampoa.

But expectations of a re-run in the German auction which begins on 31 July were dashed when several potential bidders withdrew over concerns that the licences will be too costly.

Some analysts now believe the German and Dutch auctions will raise about 50% of what had originally been forecast.