UK merger raises prospect of single network

The UK moved one step closer towards a single mobile network market on Tuesday as European telecom giants Deutsche Telekom and France Telecom announced plans to merge T-Mobile UK and Orange UK into a 50:50 joint venture.

The agreement, should it be approved by the competition authorities, will create a new market leader, with over 33 million subscribers and a 43 per cent share of the market, according to the latest figures from Informa’s WCIS.  Current leader O2 has a user base of  22.44 million, which represents a 29 per cent market share.

The newly merged player will also be able to exploit Orange’s fixed broadband offering giving enabling it to deliver converged services.

Perhaps more importantly, the deal brings the prospect of a single network market closer to reality. Orange and T-Mobile will have the opportunity to combine their 23,000 or so 2G base station sites as part of their merger. But any attempts to consolidate their 3G networks will bring Hutchison’s 3UK into the equation.

T-Mobile and 3 formed a 50:50 joint venture called Mobile Broadband Network Ltd (MBNL) in December 2007. This was the world’s largest known active 3G network sharing agreement at the time and saw the two operators elect to share their masts and 3G access networks. MBNL was given the aim of making 13,000 combined base station deployments, and around 7,000 are currently in operation. The marriage of Orange and T-Mobile would bring another 7,000 3G sites to the table, and 3UK is supportive of the proposed merger, according to Richard Moat, head of T-Mobile.

Moat said that Hutchison is expected to want to share the synergies afforded by the agreement, and it should also be noted that Orange UK already hosts 3’s 2G traffic. In a statement, 3UK said: “Our network infrastructure joint venture with T-Mobile inevitably makes us an interested party.”

The move could be good news for Swedish kit vendor Ericsson, which dominates the managed service market in the UK mobile sector. MBNL is already operated and maintained by Ericsson and, in March, Vodafone announced a seven year deal, which will see Ericsson provide maintenance and operations for Vodafone UK’s 2G and 3G radio access networks.Since July, meanwhile, Ericsson has provided field maintenance services for radio and switch sites to O2.

In fact Orange is the odd man out. In March, Nokia Siemens Networks won a contract to manage, plan, expand, optimise and provide maintenance services for the Orange UK 2G/3G mobile network for the next five years. How this deal will be affected by the proposed merger remains to be seen, and gives Nokia Siemens’ new head of services, Ashsih Chowdary — appointed this week —something to think about.

And analysts anticipate that further consolidation of the UK market looks more than likely. “The fact that 3UK is still up for sale raises a larger question mark over its future,” said Abigail Browne, senior analyst at Informa Telecoms & Media.

Telecoms.com recently ran a poll asking readers whether a mobile market could function effectively if all carriers share the same network. The answer wasn’t quite a resounding ‘yes’, but 59 per cent of the 401 voters so far believe it is possible.

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