Racal Electronics Plc and the Plessey Co Plc yesterday announced formation of an equally-owned joint venture company, Orbitel Mobile Communications Ltd, to develop, manufacture and market equipment for the pan-European digital cellular telephone system, which is due to come into service in 1991. Orbitel will operate at arms lenth from the two parent companies and incorporates Racal Carlton Ltd in Worksop, Nottinghamshire that manufactures base stations, modems and Racal Citifone portable phone, which will also manufacture Orbitel’s second generation products. It also incorporates Racal Telecommunications Products Ltd at Reading. The company has been formed as a direct result of a joint decision taken by the UK, French, German and Italian governments last week to force through official agreement on a narrowband cellular specification as standard for Europe (CI No 686). It will be primarily a software development company, and it may well pick the System 250-based Ptarmigan military radio communications switch manufactured by Plessey: the two companies acknowledge that they will use their various experience in the military field to build the new system, and Racal does not have a switch of its own. Racal Telecommunications Group Ltd managing director Gerry Whent says that it will cost UKP60m to UKP75m to develop a digital cellular system, and the partners are investing UKP30m between them over the next three years and hope to share the remainder of the cost with other European companies. Orbitel is talking to other European companies, including Motorola, Ericsson, Philips and Siemens, to form a larger consortium. A full specification for the European system will be drawn up over the next nine to 12 months with tariffs, billing and fraud protection among other areas to be resolved. The company expects revenues of UKP25m this year, coming primarily from Racal Carlton’s current activities, and expects to quadruple that figure by 1991. Orbitel is forecasting the market for digital cellular systems in Europe to be worth UKP500m to UKP600m by 1991 with 6m subscribers by the year 2000 – but these figures may well prove optimistic since they are based on the experience of Norway over the last five years, which has achieved a 2% share of the world cellular market. But Norway, and Scandinavia in general, also have a high penetration of ordinary telephones and do not reflect the situation in southern Europe, which is less well-wired.