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The design of multiple antennas in compact mobile terminals is a significant challenge, due to both practical and fundamental design tradeoffs. In this paper, fundamental antenna design tradeoffs of multiple antenna terminals are presented in the framework of characteristic mode analysis. In particular, interactions between the antenna elements and the characteristic modes and their impact on design tradeoffs are investigated in both theory and simulations. The results reveal that the characteristic modes play an important role in determining the optimal placement of antennas for low mutual coupling. Moreover, the ability of antenna elements to localize the excitation currents on the chassis can significantly influence the final performance. To demonstrate the effectiveness of the proposed approach, a dual-band, dual-antenna terminal is designed to provide an isolation of over 10 dB for the 900 MHz band without additional matching or decoupling structures. A tradeoff analysis of bandwidth, efficiency, effective diversity gain and capacity is performed over different antenna locations. Finally, three fabricated prototypes verify the simulation results for representative cases.