diff --git a/openbsc/src/gprs/gprs_sndcp_dcomp.c b/openbsc/src/gprs/gprs_sndcp_dcomp.c
new file mode 100644
index 0000000..489106b
--- /dev/null
+++ b/openbsc/src/gprs/gprs_sndcp_dcomp.c
@@ -0,0 +1,357 @@
+/* GPRS SNDCP data compression handler */
+
+/* (C) 2016 by Sysmocom s.f.m.c. GmbH
+ * All Rights Reserved
+ *
+ * Author: Philipp Maier
+ *
+ * This program is free software; you can redistribute it and/or modify
+ * it under the terms of the GNU Affero General Public License as published by
+ * the Free Software Foundation; either version 3 of the License, or
+ * (at your option) any later version.
+ *
+ * This program is distributed in the hope that it will be useful,
+ * but WITHOUT ANY WARRANTY; without even the implied warranty of
+ * MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+ * GNU Affero General Public License for more details.
+ *
+ * You should have received a copy of the GNU Affero General Public License
+ * along with this program.  If not, see <http://www.gnu.org/licenses/>.
+ *
+ */
+
+#include <stdio.h>
+#include <string.h>
+#include <stdint.h>
+#include <math.h>
+#include <errno.h>
+#include <stdbool.h>
+
+#include <osmocom/core/utils.h>
+#include <osmocom/core/msgb.h>
+#include <osmocom/core/linuxlist.h>
+#include <osmocom/core/talloc.h>
+#include <osmocom/gsm/tlv.h>
+
+#include <openbsc/gprs_llc.h>
+#include <openbsc/sgsn.h>
+#include <openbsc/gprs_sndcp_xid.h>
+#include <openbsc/v42bis.h>
+#include <openbsc/v42bis_private.h>
+#include <openbsc/debug.h>
+#include <openbsc/gprs_sndcp_comp.h>
+#include <openbsc/gprs_sndcp_dcomp.h>
+
+/* A struct to capture the output data of compressor and decompressor */
+struct v42bis_output_buffer {
+	uint8_t *buf;
+	uint8_t *buf_pointer;
+	int len;
+};
+
+/* Handler to capture the output data from the compressor */
+void tx_v42bis_frame_handler(void *user_data, const uint8_t *pkt, int len)
+{
+	struct v42bis_output_buffer *output_buffer =
+	    (struct v42bis_output_buffer *)user_data;
+	memcpy(output_buffer->buf_pointer, pkt, len);
+	output_buffer->buf_pointer += len;
+	output_buffer->len += len;
+	return;
+}
+
+/* Handler to capture the output data from the decompressor */
+void rx_v42bis_data_handler(void *user_data, const uint8_t *buf, int len)
+{
+	struct v42bis_output_buffer *output_buffer =
+	    (struct v42bis_output_buffer *)user_data;
+	memcpy(output_buffer->buf_pointer, buf, len);
+	output_buffer->buf_pointer += len;
+	output_buffer->len += len;
+	return;
+}
+
+/* Initalize data compression */
+int gprs_sndcp_dcomp_init(const void *ctx, struct gprs_sndcp_comp *comp_entity,
+			  const struct gprs_sndcp_comp_field *comp_field)
+{
+	/* Note: This function is automatically called from
+	 * gprs_sndcp_comp.c when a new data compression
+	 * entity is created by gprs_sndcp.c */
+
+	OSMO_ASSERT(comp_entity);
+	OSMO_ASSERT(comp_field);
+
+	if (comp_entity->compclass == SNDCP_XID_DATA_COMPRESSION
+	    && comp_entity->algo == V42BIS) {
+		comp_entity->state =
+		    v42bis_init(ctx, NULL, comp_field->v42bis_params->p0,
+				comp_field->v42bis_params->p1,
+				comp_field->v42bis_params->p2,
+				&tx_v42bis_frame_handler, NULL,
+				V42BIS_MAX_OUTPUT_LENGTH,
+				&rx_v42bis_data_handler, NULL,
+				V42BIS_MAX_OUTPUT_LENGTH);
+		LOGP(DSNDCP, LOGL_INFO,
+		     "V.42bis data compression initalized.\n");
+		return 0;
+	}
+
+	/* Just in case someone tries to initalize an unknown or unsupported
+	 * data compresson. Since everything is checked during the SNDCP
+	 * negotiation process, this should never happen! */
+	OSMO_ASSERT(false);
+}
+
+/* Terminate data compression */
+void gprs_sndcp_dcomp_term(struct gprs_sndcp_comp *comp_entity)
+{
+	/* Note: This function is automatically called from
+	 * gprs_sndcp_comp.c when a data compression
+	 * entity is deleted by gprs_sndcp.c */
+
+	OSMO_ASSERT(comp_entity);
+
+	if (comp_entity->compclass == SNDCP_XID_DATA_COMPRESSION
+	    && comp_entity->algo == V42BIS) {
+		if (comp_entity->state) {
+			v42bis_free((v42bis_state_t *) comp_entity->state);
+			comp_entity->state = NULL;
+		}
+		LOGP(DSNDCP, LOGL_INFO,
+		     "V.42bis data compression terminated.\n");
+		return;
+	}
+
+	/* Just in case someone tries to terminate an unknown or unsupported
+	 * data compresson. Since everything is checked during the SNDCP
+	 * negotiation process, this should never happen! */
+	OSMO_ASSERT(false);
+}
+
+/* Perform a full reset of the V.42bis compression state */
+static void v42bis_reset(v42bis_state_t *comp)
+{
+	/* This function performs a complete reset of the V.42bis compression
+	 * state by reinitalizing the state withe the previously negotiated
+	 * parameters. */
+
+	int p0, p1, p2;
+	p0 = comp->decompress.v42bis_parm_p0 | comp->compress.v42bis_parm_p0;
+	p1 = comp->decompress.v42bis_parm_n2;
+	p2 = comp->decompress.v42bis_parm_n7;
+
+	DEBUGP(DSNDCP, "Resetting compression state: %p, p0=%d, p1=%d, p2=%d\n",
+	       comp, p0, p1, p2);
+
+	v42bis_init(NULL, comp, p0, p1, p2, &tx_v42bis_frame_handler, NULL,
+		    V42BIS_MAX_OUTPUT_LENGTH, &rx_v42bis_data_handler, NULL,
+		    V42BIS_MAX_OUTPUT_LENGTH);
+}
+
+/* Compress a packet using V.42bis data compression */
+static int v42bis_compress_unitdata(uint8_t *pcomp_index, uint8_t *data,
+				    unsigned int len, v42bis_state_t *comp)
+{
+	/* Note: This implementation may only be used to compress SN_UNITDATA
+	 * packets, since it resets the compression state for each NPDU. */
+
+	uint8_t *data_o;
+	int rc;
+	int skip = 0;
+	struct v42bis_output_buffer compressed_data;
+
+	/* Don't bother with short packets */
+	if (len < MIN_COMPR_PAYLOAD)
+		skip = 1;
+
+	/* Skip if compression is not enabled for TX direction */
+	if (!comp->compress.v42bis_parm_p0)
+		skip = 1;
+
+	/* Skip compression */
+	if (skip) {
+		*pcomp_index = 0;
+		return len;
+	}
+
+	/* Reset V.42bis compression state */
+	v42bis_reset(comp);
+
+	/* Run compressor */
+	data_o = talloc_zero_size(comp, len * MAX_DATADECOMPR_FAC);
+	compressed_data.buf = data_o;
+	compressed_data.buf_pointer = data_o;
+	compressed_data.len = 0;
+	comp->compress.user_data = (&compressed_data);
+	rc = v42bis_compress(comp, data, len);
+	if (rc < 0) {
+		LOGP(DSNDCP, LOGL_ERROR,
+		     "Data compression failed, skipping...\n");
+		skip = 1;
+	}
+	rc = v42bis_compress_flush(comp);
+	if (rc < 0) {
+		LOGP(DSNDCP, LOGL_ERROR,
+		     "Data compression failed, skipping...\n");
+		skip = 1;
+	}
+
+	/* The compressor might yield negative compression gain, in
+	 * this case, we just decide to send the packat as normal,
+	 * uncompressed payload => skip compresssion */
+	if (compressed_data.len >= len) {
+		LOGP(DSNDCP, LOGL_ERROR,
+		     "Data compression ineffective, skipping...\n");
+		skip = 1;
+	}
+
+	/* Skip compression */
+	if (skip) {
+		*pcomp_index = 0;
+		talloc_free(data_o);
+		return len;
+	}
+
+	*pcomp_index = 1;
+	memcpy(data, data_o, compressed_data.len);
+	talloc_free(data_o);
+
+	return compressed_data.len;
+}
+
+/* Expand a packet using V.42bis data compression */
+static int v42bis_expand_unitdata(uint8_t *data, unsigned int len,
+				  uint8_t pcomp_index, v42bis_state_t *comp)
+{
+	/* Note: This implementation may only be used to compress SN_UNITDATA
+	 * packets, since it resets the compression state for each NPDU. */
+
+	int rc;
+	struct v42bis_output_buffer uncompressed_data;
+	uint8_t *data_i;
+
+	/* Skip when the packet is marked as uncompressed */
+	if (pcomp_index == 0) {
+		return len;
+	}
+
+	/* Reset V.42bis compression state */
+	v42bis_reset(comp);
+
+	/* Decompress packet */
+	data_i = talloc_zero_size(comp, len);
+	memcpy(data_i, data, len);
+	uncompressed_data.buf = data;
+	uncompressed_data.buf_pointer = data;
+	uncompressed_data.len = 0;
+	comp->decompress.user_data = (&uncompressed_data);
+	rc = v42bis_decompress(comp, data_i, len);
+	talloc_free(data_i);
+	if (rc < 0)
+		return -EINVAL;
+	rc = v42bis_decompress_flush(comp);
+	if (rc < 0)
+		return -EINVAL;
+
+	return uncompressed_data.len;
+}
+
+/* Expand packet */
+int gprs_sndcp_dcomp_expand(uint8_t *data, unsigned int len, uint8_t pcomp,
+			    const struct llist_head *comp_entities)
+{
+	int rc;
+	uint8_t pcomp_index = 0;
+	struct gprs_sndcp_comp *comp_entity;
+
+	OSMO_ASSERT(data);
+	OSMO_ASSERT(comp_entities);
+
+	LOGP(DSNDCP, LOGL_DEBUG,
+	     "Data compression entity list: comp_entities=%p\n", comp_entities);
+
+	LOGP(DSNDCP, LOGL_DEBUG, "Data compression mode: dcomp=%d\n", pcomp);
+
+	/* Skip on pcomp=0 */
+	if (pcomp == 0) {
+		return len;
+	}
+
+	/* Find out which compression entity handles the data */
+	comp_entity = gprs_sndcp_comp_by_comp(comp_entities, pcomp);
+
+	/* Skip compression if no suitable compression entity can be found */
+	if (!comp_entity) {
+		return len;
+	}
+
+	/* Note: Only data compression entities may appear in
+	 * data compression context */
+	OSMO_ASSERT(comp_entity->compclass == SNDCP_XID_DATA_COMPRESSION);
+
+	/* Note: Currently V42BIS is the only compression method we
+	 * support, so the only allowed algorithm is V42BIS */
+	OSMO_ASSERT(comp_entity->algo == V42BIS);
+
+	/* Find pcomp_index */
+	pcomp_index = gprs_sndcp_comp_get_idx(comp_entity, pcomp);
+
+	/* Run decompression algo */
+	rc = v42bis_expand_unitdata(data, len, pcomp_index, comp_entity->state);
+
+	LOGP(DSNDCP, LOGL_DEBUG,
+	     "Data expansion done, old length=%d, new length=%d, entity=%p\n",
+	     len, rc, comp_entity);
+
+	return rc;
+}
+
+/* Compress packet */
+int gprs_sndcp_dcomp_compress(uint8_t *data, unsigned int len, uint8_t *pcomp,
+			      const struct llist_head *comp_entities,
+			      uint8_t nsapi)
+{
+	int rc;
+	uint8_t pcomp_index = 0;
+	struct gprs_sndcp_comp *comp_entity;
+
+	OSMO_ASSERT(data);
+	OSMO_ASSERT(pcomp);
+	OSMO_ASSERT(comp_entities);
+
+	LOGP(DSNDCP, LOGL_DEBUG,
+	     "Data compression entity list: comp_entities=%p\n", comp_entities);
+
+	/* Find out which compression entity handles the data */
+	comp_entity = gprs_sndcp_comp_by_nsapi(comp_entities, nsapi);
+
+	/* Skip compression if no suitable compression entity can be found */
+	if (!comp_entity) {
+		*pcomp = 0;
+		return len;
+	}
+
+	/* Note: Only data compression entities may appear in
+	 * data compression context */
+	OSMO_ASSERT(comp_entity->compclass == SNDCP_XID_DATA_COMPRESSION);
+
+	/* Note: Currently V42BIS is the only compression method we
+	 * support, so the only allowed algorithm is V42BIS */
+	OSMO_ASSERT(comp_entity->algo == V42BIS);
+
+	/* Run compression algo */
+	rc = v42bis_compress_unitdata(&pcomp_index, data, len,
+				      comp_entity->state);
+
+	/* Find pcomp value */
+	*pcomp = gprs_sndcp_comp_get_comp(comp_entity, pcomp_index);
+
+	LOGP(DSNDCP, LOGL_DEBUG, "Data compression mode: dcomp=%d\n", *pcomp);
+
+	LOGP(DSNDCP, LOGL_DEBUG,
+	     "Data compression done, old length=%d, new length=%d, entity=%p\n",
+	     len, rc, comp_entity);
+
+	return rc;
+}