Orange and T-Mobile have announced that they are to merge their British operations, creating the UK’s largest mobile operator with over 28 million customers.
The combined company will claim annual revenue of nearly €10bn and 37% UK market share, pushing O2 and Vodafone down into second and third place.
As well as the increased customer base the merger will generate cost savings of around €4bn and the firms have promised improved network coverage and quality and better customer service. Cost savings are expected from the consolidation of back-office operations, although the companies have not said whether there will be any job losses as a result of the merger.
The new company will be a 50:50 joint venture headed by Orange chief executive Tom Alexander while Richard Moat, T-Mobile’s UK boss, will move to the role of COO. The firms will remain separate for the first 18 months after the deal is completed while branding is reviewed.
“By combining our operations in the UK, we anticipate the long-awaited consolidation in one of Europe’s most competitive markets, thereby creating a well-positioned player,” said Gervais Pellissier, chief financial officer of France Telecom.
“This will reinforce fair competition and will provide strong benefits for our customers through improved coverage, quality of service and an enhanced capacity to develop new services and technologies.”
There has been speculation throughout the summer that Deutsche Telekom, owner of T-Mobile UK, was looking to exit the crowded UK mobile market by selling the company. In June, it was reported that Vodafone was preparing a bid and more recently Telefonica, the Spanish owner of O2, was rumoured to be interested.
T-Mobile currently claims about 15% of the UK mobile market with around 12 million subscribers. It recently admitted that it had lost 87,000 UK customers in the three months to the end of June 2009.
Orange has about 17 million mobile and broadband customers in the UK, giving it 22% market share.
The deal is expected to close by the end of October, although the deal is likely to come under close scrutiny from regulators.
