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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).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. 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.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.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 NewsANALYSIS 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. This deal - if it goes ahead - will shake up the UK mobile market.
The branding will stay the same for a while - though its larger market share may mean the Orange name triumphs Both brands would stay for a while - but the Orange name is tipped to remain long-term.
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. Being market leader would give it clout when it came to the handsets available. Neither Orange or T-Mobile offer "must have" phones such as the iPhone and Blackberry Storm - but this could change.
The larger scale that the merged company should lead to it being more competitive on price - offering cheaper calls, texts, broadband and handsets And the firms promise customers will get better network coverage - and there's potential for investing in better, faster 3G networks and data access through mobiles.
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. But not everyone will be happy. The range of tariffs offered by the two companies is likely to be scaled back.
Meanwhile, just three major players in the UK mobile market would mean less consumer choice.
Which? surveys suggest Orange and T-Mobile have worse customer service than their rivals - and meshing company databases together will bring another challenge.
Read Robert Peston's blog Return of the deal?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 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.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.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 writedownsAvoiding 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 TelekomDEAL 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.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.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%).