T-Mobile seals Orange deal to create 'UK champion'

Orange and T-Mobile are set to create "a new UK champion" after their European parent companies confirmed the mobile phone groups will merge.

After weeks of negotiations and rival offers from O2 and Vodafone, the owner of T-Mobile UK, Deutsche Telekom, and Orange's parent, France Telecom, yesterday announced the exclusive negotiations to form a 50:50 joint venture.

The deal, which is expected to complete next year, will create the largest mobile operator in the UK with 28.4 million customers, representing 37 per cent of the market's subscribers. Their closest rival, O2, has 27 per cent. O2 and Vodafone, who tabled bids for T-Mobile last month, declined to comment.

Matt Hatton, the principal analyst at Analysys Mason, said: "This is a very big deal for the UK market. It is good for Orange and T-Mobile because, for network operators, it is all about scale; generally the bigger the better."

The venture will be headed by Tom Alexander, the chief executive of Orange, with Richard Moat, brought in to head T-Mobile UK in May, becoming the chief operating officer.

Mr Moat said: "Deutsche Telekom looked at a number of M&A opportunities and an organic turnaround strategy for T-Mobile UK. They decided this was the best route for the shareholders and the business." Mr Alexander added: "The scale gives Orange opportunities to become more competitive."

The two companies said the deal would bring "substantial benefits to UK consumers". It will expand the network coverage, and the quality of their G and 3G services. "It's about building the best network, not just the biggest," Mr Alexander said. The company added that the merger should generate synergies of €4bn (£3.5bn) through combining network and IT operations, cutting site rental and maintenance costs as well as, inevitably, reducing staff numbers.

The group plans to expand its operations in the smartphone market. Mr Alexander said: "The whole vision is to build a network that's very strong for supporting new devices. It is much more than just about voice and text."

Customer bills are unlikely to fall in the wake of the tie-up. Mr Hatton, of Analysys Mason, said: "UK consumers get a pretty good deal and the margins are tight, so I wouldn't anticipate any great price discount."

The two brands will continue to operate independently for 18 months after the deal is signed, before the management decides on a single name for the fully integrated group in 2012. Tim Höttges, the chief financial officer of Deutsche Telekom, said it was the first step in "creating a new UK champion" in a market "which is undoubtedly one of the toughest and most competitive".

The deal is likely to face scrutiny from regulators in the UK and Europe. Yet, Mr Höttges said: "We do not expect big remedies for the deal. We don't believe the market dynamic will lose momentum as a result." Credit Suisse was not so sure: "On its own the European Commission might pass the deal quite fast. But the UK could complicate and slow down the process, given the Ofcom review of the UK mobile market, the coming spectrum auction and the GSM refarming question."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue
E L James's book Grey is a reminder of how the phenomenon of the best-seller works

Grey is a reminder of how the phenomenon of the best-seller works

It's hard to understand why so many are buying it – but then best-selling was ever an inexact science, says DJ Taylor
Behind the scenes of the world's most experimental science labs

World's most experimental science labs

The photographer Daniel Stier has spent four years gaining access to some of the world's most curious scientific experiments
It's the stroke of champions - so why is the single-handed backhand on the way out?

Single-handed backhand: on the way out?

If today's young guns wish to elevate themselves to the heights of Sampras, Graf and Federer, it's time to fire up the most thrilling shot in tennis
HMS Saracen: Meeting the last survivor of a submarine found 72 years after it was scuttled

HMS Saracen

Meeting the last survivor of a submarine found 72 years after it was scuttled
7/7 bombings 10 years on: Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'

7/7 bombings 10 years on

Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'