EU Approves Orange/T-Mobile Merger

The merger between T-Mobile and Orange in the UK has been given the green light by the European Commission after the operators agreed to give up some of their spectrum. The decision means that implementation of the integration measures can start immediately. Orange says the closing of the transaction is expected in the spring.
Tim Httges, CFO of Deutsche Telekom, says the decision is: excellent news, for our customers, for our highly committed teams in the UK and for our shareholders.
Httges adds: Now the way is clear for pooling our resources to create an outstanding high-speed mobile broadband network in one of the most competitive markets in Europe. This joint venture company is based on a significant potential of synergies which create substantial value for the two shareholders and translate directly into customer benefits. Our teams in the UK will be rolling up their sleeves to roll out these benefits.”
The operators parent companies Deutsche Telekom and France Telecom offered to divest 2×15 MHz of their joint GSM spectrum (1800 MHz) by the end of 2011. Of the divested spectrum, 2×10 MHz needs to be cleared by 30 September 2013 at the latest,  and a further 2×5 MHz need to be cleared by 30 September 2015 at the latest. In addition, the existing network sharing deal with 3UK, owned by Hong Kong based Hutchison Whampoa, was reinforced.
Orange says that, as outlined back in September 2009, the new joint venture company is expected to generate estimated synergies with a net present value in excess of 4 billion (3.6 billion). The new business will have pro forma 2009 revenues of approximately 8.5 billion and EBITDA of 1.55 billion.
The board of the new joint venture company will have balanced representation from Deutsche Telekom and France Telecom. On the formation of the new business, Tim Httges, CFO of Deutsche Telekom, will lead the board as non-executive chairman for two years after which time it will rotate to Gervais Pellissier for two years. The management team will be led by Chief Executive, Tom Alexander, currently CEO of Orange UK, and Richard Moat, currently CEO of T-Mobile UK, who will take on the role Chief Operating Officer.
The T-Mobile and Orange UK brands will continue to operate in the UK for at least 18 months after the completion of the transaction. The company will have a combined customer base of around 29.5 million.
The Communications Consumer Panel, which was established to advise Ofcom and other bodies on the consumer interest in the markets it regulates, says that while the conditions attached to the merger are designed to address some of the consumer concerns raised by the panel, without seeing the Commission's detailed analysis, it is not possible to say whether the merger will be good for UK consumers.
“UK consumers have up to now benefited from the choice, innovation and low prices that result from a competitive mobile market and we want to see this continue,” says Panel Chair Anna Bradley. “There may be advantages to clearing the merger at this early stage, but it also carries risks for consumers. If the decision-making process had involved a more detailed and open investigation this would have allowed greater scrutiny of the merger's impact and given consumers more confidence in the outcome. It is now incumbent on T-Mobile and Orange to proceed with the merger with minimum disruption and confusion for their customers.”