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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. | |
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 News | ANALYSIS Simon Atkinson, Business reporter, BBC News |
This deal - if it goes ahead - will shake up the UK mobile market. | |
Both brands would stay for a while - but the Orange name is tipped to remain long-term. | |
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. | |
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 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 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 | 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. | 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%). |