T-Mobile, Orange get green light for UK merger

On Monday the UK mobile subsidiaries of Deutsche Telekom and France Telecom got the green light from the European Commission to go ahead with their proposed merger.

Integration measures are expected to start immediately, with the closing of the transaction expected before the Spring is out. The deal, announced in August 2009, is to be conducted as a merger of equals, with T-Mobile and Orange folded into a 50:50 joint venture. This move will create a new market leader, with over 34 million subscribers and a 43 per cent share of the UK market, compared to current leader O2’s 22.4 million strong user base and 28.5 per cent market share, according to the latest figures from Informa Telecoms & Media’s WCIS.

The new player will also benefit from the inclusion of Orange’s fixed broadband subscriber base and the potential to deliver converged services.

As previously outlined, the joint venture is expected to generate estimated synergies with a net present value in excess of €4bn.

By way of concessions, the companies have agreed with the EC to divest 2x15MHz of their joint GSM spectrum in the 1800MHz band by the end of 2011. Of the divested spectrum 2x10MHz needs to be cleared by September 30 2013 at the latest and further 2x5MHz need to be cleared by September 30 2015.

T-Mobile’s existing network sharing deal with 3UK was also reinforced. Through Mobile Broadband Network Ltd, formed by 3 and T-Mobile UK in 2007, the two firms share their masts and 3G access networks. 3UK is supportive of the proposed merger between T-Mobile and Orange, and is expected to want to share in the synergies afforded by the agreement. It should be noted that Orange UK already hosts 3’s 2G traffic and, in a statement released shortly after the merger announcement, 3UK said: “Our network infrastructure joint venture with T-Mobile inevitably makes us an interested party.”

A combined brand is ultimately expected, but this week the companies said the T-Mobile and Orange UK brands will continue to operate in the UK for at least 18 months after the completion of the transaction.