T-Mobile and Orange confirm merger

T-Mobile and Orange confirm merger

Deutsche Telekom’s T-Mobile and France Telecom's Orange are in exclusive negotiations to create a joint venture which will take the lion's share of the UK's mobile phone market.

As tipped by Mobile yesterday, the two telecoms giants confirmed today that they want to merge T-Mobile and Orange by November. The deal will bring in 28.4m customers and 37% of market share - 10% more than their nearest rival O2.

Deutsche Telekom said it will put T-Mobile into the joint venture on a cash free, debt free basis, including T-Mobile's 50% holding in its 3G network joint venture with Hutchinson. For its part France Telecom will pump £1.25bn of intra-group debt into the joint venture to make up for T-Mobile's UK's lower assett value.

The two brands will be maintained separately for 18 months, after the deal closes, whilst management develops a new branding strategy.

The management team will be led by Tom Alexander, currently CEO of Orange UK, as CEO, and Richard Moat, current head of T-Mobile UK, as COO.

The integration is sure to see job losses with the joint venture expected to merge stores and integrate and streamline their operations.The two firms are aiming for savings of £445m a year by 2014.

Timotheus Hottges, CFO of Deutsche Telekom, said: 'In the second-biggest market in Europe, which is undoubtedly one of the toughest and most competitive, we are giving T-Mobile UK a clear and stong future.'

Gervais Pellissier, CFO of France Telecom said the deal would bring the 'long awaited consolidation in one of Europe's most competitive markets.' He added: 'This will reinforce fair competition and provide strong benefits for our customers.'

However the question of how fair the competition  will be left to the Office of Fair Trading.

Phil Kendall,  global wireless director at Strategy Analytics told Mobile that the UK regulatory bodies were looking for more,not less, operators in the market. He added: 'The market may be tough but that won't wash with the regulators as operators are still making 30% margins in the UK.'

However the two firms will be keen for it to succeed as the benefits to both are clear.

The merger will save Deutsche Telecom from selling T-Mobile for the disappointing offer of around £3.5bn which sources say Vodafone and Teklefonica made last week.

For France Telecom the deal will strengthen its position in the market without paying cash or taking on more debt.

Written by Mobile Today
Mobile Today

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