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T-Mobile and Orange in UK merger | T-Mobile and Orange in UK merger |
(about 1 hour later) | |
T-Mobile and Orange plan to merge their UK businesses, creating a mobile phone giant with 28.4 million customers. | T-Mobile and Orange plan to merge their UK businesses, creating a mobile phone giant with 28.4 million customers. |
If completed, a deal between Deutsche Telekom's T-Mobile and Orange owner France Telecom would see a firm with sales of 9.4bn euros (£8.2bn; $13.5bn). | |
Holding about 37% of the mobile market it would be the UK's largest provider , overtaking Telefonica's O2. | |
It is the second large corporate action in two days, after Kraft Food's £10.2bn takeover proposal for Cadbury. | |
Orange and T-Mobile said their deal - due to be signed by November - would "bring substantial benefits to UK customers", and promised expanded network coverage, better network quality and improved customer services. | Orange and T-Mobile said their deal - due to be signed by November - would "bring substantial benefits to UK customers", and promised expanded network coverage, better network quality and improved customer services. |
However it is likely that competition authorities in the UK and EU will probe the deal. | However it is likely that competition authorities in the UK and EU will probe the deal. |
'Efficiencies' | 'Efficiencies' |
Both brands would remain separate for the first 18 months after the deal is completed while branding is reviewed. | |
ANALYSIS Simon Atkinson, Business reporter, BBC News | |
If you are one of the two firms' 28.4 million customers - you might see some changes if the deal goes ahead as planned. | |
The branding will stay the same for a while - though its larger market share may mean the Orange name triumphs | |
The firms claim customers will get better network coverage - that's fewer spots where your phone cannot get a signal - though there is already some sharing of networks in the industry. | |
The larger scale that the merged company should lead to it being more competitive on price - offering cheaper calls, texts, broadband and handsets | |
But if there were just three major players in the UK mobile market (along with O2 and Vodafone) - regulators will want to see that this reduced choice is not abused by the firms. | |
Read Robert Peston's blog Return of the deal? | |
Orange chief executive Tom Alexander would lead the new company, with T-Mobile's UK boss Richard Moat as chief operating officer. | |
Orange employs 12,500 people in the UK, while T-Mobile has UK workforce of 6,500. | Orange employs 12,500 people in the UK, while T-Mobile has UK workforce of 6,500. |
A spokeswoman confirmed there would be "efficiencies" that could be made across both businesses - but said it was too early to give details of any impact on staff. | A spokeswoman confirmed there would be "efficiencies" that could be made across both businesses - but said it was too early to give details of any impact on staff. |
Integrating the businesses would cost between £600m and £800m, the firms said. This bill would include decommissioning mobile phone masts, cutting back the network of stores and streamlining other operations. Over time, savings should reach about £3.5bn, they added. | |
Mobile phone analyst Nigel Hawkins told the BBC that it was not unprecedented for a firm to have more than a third of a European country's mobile phone market. | |
"Over the next few weeks and months there will inevitably be some negotiation with regulators, and we could see some concessions from the operators," he added. | "Over the next few weeks and months there will inevitably be some negotiation with regulators, and we could see some concessions from the operators," he added. |
"If the deal goes ahead, then this merged firm, along with O2 and Vodafone will have more than 90% of the UK market and there will be concern that there remains plenty of competition and that this position is not abused." | "If the deal goes ahead, then this merged firm, along with O2 and Vodafone will have more than 90% of the UK market and there will be concern that there remains plenty of competition and that this position is not abused." |
Avoiding writedowns | Avoiding writedowns |
Deutsche Telekom said earlier this year that it was considering its options for its UK business - which has struggled to win customers in the highly competitive market - which sees five operators and several smaller players compete. | Deutsche Telekom said earlier this year that it was considering its options for its UK business - which has struggled to win customers in the highly competitive market - which sees five operators and several smaller players compete. |
DEAL IN NUMBERS 28.4m customers37% UK market share£8.2bn sales (in 2008) Source: Deutsche Telekom | |
Observers say that a joint venture would allow the German firm to avoid the write downs it could face if forced to sell T-Mobile UK for less than it hoped. | |
Meanwhile, for France Telecom, the deal is a way to strengthen its position in the UK market without paying cash or taking on vastly more debt. | |
T-Mobile is currently the fourth-largest mobile operator in the UK, with a 15% share of the market. O2 has a 27% share, followed by Vodafone (25%) and Orange (22%). | T-Mobile is currently the fourth-largest mobile operator in the UK, with a 15% share of the market. O2 has a 27% share, followed by Vodafone (25%) and Orange (22%). |