UPC Ireland is close to finalising an agreement to launch a new mobile phone service using the network of Three Ireland.

Neither UPC nor Three would comment, but it is understood the structure of a deal has been largely agreed following more than two years of talks between the companies.

The MVNO (mobile virtual network operator) agreement will not be formally announced until after European regulators give a final decision on Three's €780 million bid for O2 Ireland, which is due by March 24th.

It is likely that the European Commission’s competition directorate, which has launched a detailed investigation of the Three/O2 merger, will insist on a new MVNO entrant to the market as part of a set of competition “remedies” to pass the takeover.

By having an agreement already in place with UPC and its parent, Liberty Global, Three would be in a position to swiftly fulfil that condition if, as expected, the commission demands a new MVNO.

When Three, owned by Hutchison Whampoa, bought Orange Austria earlier this year, it also concluded an MVNO agreement with UPC as part of the package of remedies sought by regulators to pass that deal.

Network piggybacking
Under an MVNO agreement, an operator launches new services by "piggybacking" on the network infrastructure of a rival, for a fee, but using a new brand.

Industry sources are speculating that it is also likely that Three will agree to offload O2’s interest in Tesco Mobile, which operates as an MVNO in a joint venture with the supermarket giant.

As well as heralding the arrival of UPC as the newest mobile operator, the Three/O2 deal, if passed, is also likely to see changes among network sharing deals in the market.

Eircom's Meteor already has such an agreement with O2 and is known to be keen to retain it after the merger of O2 and Three. Eircom will also tell European regulators that the allocation of mobile spectrum, bought by operators last year for a combined €450 million, should be revisited.

Three also has a network- sharing agreement with Vodafone, which industry sources expect to fall foul of the deal with O2.

When UPC’s new mobile service is launched next year, it will become the second operator to offer “quad-play” bundles to the Irish market, comprising television, landline, broadband and mobile services.

Eircom, UPC’s main rival, was first to market with quad-play last month.