This paper presents a theoretical method to study the performance improvement in GSM networks due to slow frequency hopping when a limited number of hopping channels are available. By comparing the performance improvement offered by frequency hopping with intra-timeslot handover, new design thresholds and capacity gain figures are derived for GSM networks. The analysis shows that to gain an advantage from frequency hopping it is necessary to deploy more than two hopping channels. Frequency hopping enables the network designer to reduce the C/I protection margin by about 5dB when the channel occupancy is low and by about 3dB when the channel occupancy is high. This reduction in protection margin results in the improvement in spectral efficiency of 82% when channel occupancy is low and 54% when channel occupancy is high. Frequency hopping can be used to improve the network quality where significant improvements can be achieved. The improvement in network quality depends on the channel occupancy.