The desk telephone is to be banished for thousands of Tesco staff in a £100 million tie-up with Cable & Wireless under which employees will use mobile phones for all calls.

Under the five-year deal, which will begin next month, staff in Tesco's 1,500 stores and distribution centres will be given Cable & Wireless Sim cards for mobile phones, allowing both fixed line and mobile calls to be carried through one handset.

C&W will oversee all Tesco's data, fixed and mobile voice telecommunications for its sites in 14 countries.

The scheme will create a private GSM network for Tesco across all its stores and distribution sites. Calls between these areas, across the UK, will be free. It is the first new GSM mobile network to be built in Britain since the 1990s.

When employees are inside Tesco buildings their calls will run over C&W's fixed-line internet protocol (IP) system, with calls to outside numbers charged at fixed-line rates. When out of the system's range, calls will be routed through a mobile network system.

Nick Folkes, Tesco UK's infrastructure and operations IT director, said that the rationale behind the deal was cost savings but that it also created new ways of using the network, including video-conferencing between its international offices and in-store information kiosks for customers.

C&W's IP network will link the group's 1,800 UK sites, including regional offices and head office, with the potential for the mobile-only scheme - known in the telecoms industry as fixed mobile convergence (FMC) - to cover about 40,000 staff.

Ericsson is helping to build the network as part of a £30 million, five-year agreement with the British telecoms group. The Swedish telecoms equipment maker will provide pico cells and femtocells - miniature mobile base stations - at sites in the UK to create private networks for C&W's corporate customers.

Tesco is C&W's first customer for the new service, giving the group its first bite of the UK's £500 million mobile enterprise market.

Andy Evans, C&W's chief technology officer, said chief executives appreciated the value of the new system when they realised that their staff tended to use mobile phones while sitting next to a fixed line. “I say 'how would you like all these calls to be on net calls on your own private network?' In addition they can get rid of desk phones and the cost of supporting them.”

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