AMSTERDAM (Reuters) - Palm and pumpkin seed oil could soon be generating electricity to help power cell phone networks across Africa under a plan to replace fossil fuels with sustainable biofuels made from crops grown by local farmers.

Swedish telecoms networks group Ericsson (ERICb.ST) and South African cell phone operator MTN (MTNJ.J) said on Wednesday they want to start replacing diesel with biofuels in electricity generating stations powering mobile phone base stations in rural Africa.

Supported by the GSM Association's development fund, they will start with a project in Nigeria to use biofuels for power generators supplying mobile base stations located beyond the reach of the electricity grid.

"We're planning to replicate this in Uganda, Rwanda and Kenya. India and Bangladesh have also expressed interest," said Ben Soppitt, program manager emerging markets at the GSM Association (GSMA).

Starting in Nigeria, Africa's most populous nation, fuel will be processed from palm, groundnut, pumpkin seeds and jatropha.

The crops to generate the biofuel will be cultivated close to the base stations, helping local farmers, cutting dependency on fossil fuels and reducing fuel transportation needs. The cost of fuel, including security to protect transport and storage, can be 80 percent of the cost of a rural phone network.

MTN operates in 21 countries in Africa and the Middle East and had 31 million subscribers, while Ericsson is the world's biggest cell phone networks company with around 30 percent market share.

AFRICA TAKES THE LEAD

"The early adoption of biofuel-powered mobile networks would place Africa at the forefront of a new wave of innovation," said Karel Pienaar, chief technology officer at MTN.

Soppitt said the cell phone industry could be the world's first to put alternative energy at the core of its operations.

"Ericsson has been working on this for a while, and with their significant market share the entire market will move with them," he said.

Rural areas in emerging economies where most new cell phone subscribers come from are often not connected to the electricity grid, which means that the base stations to connect cell phone users to the network are powered by generators.

In Nigeria, 75 percent of the country is not grid-connected.

Fuel consumption by these base stations can be significant. Ericsson estimates 25,000 liters of fuel are needed every year to power a base station. The same amount would power close to 20 cars, each driving 20,000 kilometers, for a year.

Worldwide, tens of thousands of new base stations are erected every year, most of them in rural areas as operators aim to expand the coverage of their networks. There are currently close to 2.5 billion cell phone users on the planet.

The GSMA hopes that the introduction of biofuels will be significantly cheaper than using diesel, and hopes for total cost reductions of 30 percent or more.

"You need to achieve a 30 percent improvement to create sufficient momentum for change," Soppitt said.

Ericsson estimates around 0.5 square kilometers of palm oil crops are needed to generate the fuel for 20 base stations, the equivalent of 83 football fields.

The crops will be processed into fuel at local facilities.

Ericsson will control farming methods, making sure crops are not genetically manipulated, are grown sustainably and do not require fresh clearing of land by cutting forests.

Solar and wind energy are also being investigated as alternative power sources for remote base stations.

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