BBC Technology has signed a multimillion-pound deal to produce the content for Hutchison 3G's third generation mobile phone service, due to launch later this year.

As part of the five-year deal, BBC Technology, a commercial subsidiary that provides technology services for the BBC and third parties, will set up a centre in West London dedicated to processing content for the service.

Before any video or audio content - such as sports highlights, film clips or news headlines - can be sent to subscribers, it must be processed and converted into the correct format.

BBC Technology, which launched last year and already employs 1,300 people, will undertake this task.

Hutchison 3G's managing director, Colin Tucker, said: "BBC Technology understands how to work closely with broadcasters to deliver content."

Philip Langsdale, the BBC Technology chief executive, added: "Hutchison 3G requires cutting-edge content production technology and we are best positioned to deliver this."

Hutchison paid £4.4bn for its 3G licence in 2000 as part of the government's money-spinning auction of the spectrum.

As a new entrant to the market, it is guaranteed the largest slice of the spectrum and is expected to be the first telecoms company to launch a 3G service.

However, it faces an uphill struggle to establish itself alongside its established rivals, Orange, One2One, Vodafone and BT.

There are also significant technological hurdles to overcome and it remains to be seen whether 3G services prove a hit with consumers.