O2 trialling device to boost indoor 3G coverage

LONDON, Feb 11 (Reuters) - Britain's top mobile phone company, O2, is to trial a new technology that would boost the indoor coverage of third-generation mobile phone networks, it said on Monday.

O2 is working with Japanese electronics group NEC Corp (6701.T) on Britain's first live femtocell trial.

A femtocell is a small, low-power indoor base station for 3G mobile phone networks that enables operators to improve indoor mobile coverage at a substantially lower cost than the alternative of adding more cell towers.

The devices are plugged into a customer's broadband Internet connection, like a wireless Internet base station, and allow users to make calls or use data services with their regular 3G mobile phones.

Calls made through the femtocell could be priced more cheaply to encourage consumers to use their mobile phones instead of their fixed line.

O2 began the initial period of testing in February and will roll the trial out to around 500 users across the country in the summer if successful. A commercial launch could then take place by early 2009.

"Our Apple iPhone is already driving unheard-of levels of mobile Internet usage, and the introduction of flat-rate data tariffs is expected to increase this further," Vivek Dev, chief operating officer of Telefonica (TEF.MC) O2 Europe said.

"Both of these place huge capacity demands on our networks, and because so much of that usage is at home, femtocells coupled with DSL (broadband) could provide an alternative capacity resource."

O2, which is the leading British mobile phone company in terms of revenue and customers, won the deal to bring Apple's (AAPL.O) iPhone to Britain last year.

In a report last year provided by NEC, ABI Research forecast the market for femtocell equipment could grow to more than $4 billion by 2012. (Reporting by Kate Holton, editing by Sue Thomas)