Orange, T-Mobile UK set to merge: report

Robert Clark
08 Sep 2009

France Telecom and Deutsche Telekom are set to merge their UK mobile operations, creating the country’s largest cellco.

The two operators were close to signing a deal last night and would announce it as early as today, the Wall Street Journal said.

The joint venture between FT’s Orange and Deutsche’s T-Mobile UK will have more than 30 million mobile customers, or 38% of the market, overtaking Telefonica-owned 02 as the largest carrier.

The deal follows months of speculation since Deutsche estimated T-Mobile to be worth £3.3 billion ($5.4 billion).

DT booked a €1.8 billion ($2.57 billion) impairment charge against T-Mobile after the first quarter, when it lost 111,000 customers.

The two carriers are likely to pool their assets in a 50-50 partnership, although one source said France Telecom would contribute an additional €1.2 billion ($1.72 billion) to the venture.

Citigroup analysts value Orange UK at £4.1 billion ($6.7 billion) and T-Mobile UK at £3 billion, FT.comreported.

Telefonica and Vodafone both made informal offers for T-Mobile, but are unlikely to raise their bids.

The deal between the third and fourth biggest operators in the market is more likely to win the approval of competition authorities than one involving either of the larger rivals.

The Orange and T-Mobile brands would continue separately for an initial period, the said.

The high-profile UK mobile market is one of the world’s most crowded, contested by five global operators. 02 leads the market, followed by Vodafone, Orange, T-Mobile and 3.

The newly-merged business would also carry Virgin Mobile’s MVNO customers, who are currently hosted on the T-Mobile network.

T-Mobile UK has struck a network sharing deal with 3, Vodafone has hooked up with O2 and Orange shares infrastructure with Vodafone.

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