T-Mobile and Orange to merge

Despite rumours of bids from Vodafone and O2, mobile operators T-Mobile and Orange are to join forces.

handshake

T-Mobile and Orange have merged to create a new giant in the UK mobile space.

After speculation that Vodafone and O2 were in a bidding battle for the ailing UK arm of Deutsche Telekom, that firm and Orange's parent France Telecom have announced a new joint venture company, bringing the two UK operators together.

According to the pair, the new 50:50 joint venture will become the biggest mobile operator in the UK, with 28.4 million customers - some 37 per cent of the market. The two firms are currently ranked third and fourth. The pair also claimed the new business would have revenues of 7.7 billion.

The deal is expected to be closed by October, and finalised by regulators in early 2010.

The new company will be run by Orange chief executive Tom Alexander, while T-Mobile's leader Richard Moat will become chief operating officer, while the board will be balanced between the two firms.

The firms said they expect cost savings of 3.5 billion from the deal, mostly by consolidating networks, IT and marketing, but also from cutting other costs such as administration, support and customer service - which suggests job cuts. In a conference call, Moat said the tieup would let the firms "optimise the combined workforce" in customer service.

Branding has yet to be decided, and both firms will keep their separate names for 18 months after the deal is finalised, while management looks to come up with a solution.

The deal will see Deutsche Telekom hand over T-Mobile UK, its 50 per cent holding in a 3G network with Hutchinson, and its gross tax losses of 1.5 billion. France Telecom will hand over Orange UK and 1.25 billion in debt "in order to equalise the value of the contributions to the joint venture," the statement said.

The firms also claimed the pairing will better be able to offer new products, as Orange has a broadband business, and better coverage, by combining both firms networks.

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