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,
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
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
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.