Under the deal, for which no financial details were released, Zed and Yahoo! will provide a range of co-branded mobile services across Europe, beginning in Germany, Italy and the UK later this year. Initially, the services will include ring tones, picture messages, chat and news, Sonera Zed said.
Zed, a wholly-owned subsidiary of Finnish telecommunication company Sonera, provides entertainment, communication and information services for mobile devices, mainly via SMS and in some markets through WAP.
In Europe, Yahoo! provides communications, commerce and media services over eight different sites.
As part of the agreement, Zed will also provide its content delivery and billing technology to Yahoo!, which plans to offer its mail and messaging services to mobile users in Europe, according to Zed company spokesman Pekka Somerto. "This service will be entirely Yahoo!-branded," Somerto said.
Yahoo has agreed to acquire a 15% stake in Zed, with the right to increase its share in the company over the next two years by up to 100%.
"The deal brings together the strengths of two companies. Yahoo! has a large Internet customer base in Europe, a strong brand and top content. Zed has experience with mobile operators and the technology to deliver and bill content over wireless networks," Somerto said.
Currently, Zed has service contracts with 17 mobile operators in six countries, according to Somerto. The company has a monthly average of 3 million customers who carry out about 30 million commercial transactions per month, he said.
Zed will continue to offer existing services under its own brand, Somerto said.
The decision to open the door to outside investors comes as Sonera moves to tighten its belt after some disastrous investments. Last month the partially government-owned operator decided to write off €4.3bn (£2.7bn) for its 3G investments, admitting that the value of the licences had fallen markedly. Sonera and Swedish teleco Telia have agreed to merge.