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Orange and T-Mobile plan network merger

Alex Scroxton

The third and fourth largest mobility providers in the UK, Orange and T-Mobile, plan to merge their networks in a 50:50 joint venture that will create Britain's biggest mobile network.

If a deal is finalised, the combined network would hold 37% of the UK market and approximately 28 million subscribers, pushing market leader O2 and second-placed Vodafone into second and third place respectively.

The announcement comes as something of a snub to Vodafone, which was thought to be on the verge of making its own move on T-Mobile at the end of June, as reported in MicroScope. 

O2's Spanish parent also appeared to be on the verge of opening its chequebook, but these approaches subsequently came to nothing. Ovum analysts suggested at the time that Vodafone's VC-backers were unhappy over the group's UK performance and were putting it under pressure to either grow or exit the market. 

The deal between Orange and T-Mobile will naturally be subject to due diligence and review by the relevant competition authorities, although in this case EC is unlikely to run interference, as there are already several other European theatres where one operator holds over 40% of the market. Gervais Pellissier, France Telecom CFO, went so far as to say that the venture would "reinforce fair competition". 

It is widely thought that consolidation in the UK market will be a positive - at least for the shareholders - as the major players will gain greater pricing power and higher profit margins as a result. 

Timotheus Höttges, CFO at T-Mobile parent Deutsche Telekom, said the deal would guarantee T-Mobile UK a "clear and strong" future in one of the toughest European theatres; note that T-Mobile, despite being one of the largest operators in the world, has been haemorrhaging subscribers in the UK of late. 

The JV will be lead by Orange UK CEO Tom Alexander and T-Mobile UK CEO Richard Moat, and ultimately will result in one unified brand, said the firms, which have committed to maintaining their separate branding for 18 months after launch.


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