David Prosser: Alarm bells ring at OFT

Click to follow

Outlook One can see why T-Mobile and Orange were keen to have their merger signed off by European Union regulators rather than the UK's Office of Fair Trading, but did they really expect to get away with it? The OFT's announcement yesterday that it wants directly to scrutinise the deal was both inevitable and quite right.

The two phone companies say they consulted the OFT from the moment their deal was unveiled, and argue that this is an agreement between French and German companies. But only their British subsidiaries are merging – and once they do, they will have a market share of 37 per cent. It is possible that T-Mobile and Orange will be able to avoid a referral to the Competition Commission, which would tie up the deal in red tape for much of this year (the EU, by contrast, could clear the merger as soon as this month).

They will, however, have to make concessions to the OFT. These include an assurance that T-Mobile's network-sharing deal with the UK's smallest operator, 3, will not be jeopardised by the merger. It is possible too, that the OFT may make noises about T-Mobile's contract with Virgin, the virtual network provider, which takes the combined entity to 40 per cent of the British market.