Future is merged to a T for Orange

By KARL WEST
Updated:

Orange and T-Mobile are merging their UK businesses to create a giant mobile phone group with a dominant 37 per cent market share.

France Telecom, which owns Orange, and Deutsche Telecom, owner of T-Mobile, entered into 'exclusive' negotiations to pool their UK mobile businesses into a 50-50 joint venture that will slash £3.5billion from the cost base.

The newly engaged couple will have about 29million customers and sales of £8.2billion.

Orange UK chief Tom Alexander will head the venture, with T-Mobile's UK boss Richard Moat becoming chief operating officer.

orange

Fewer players: the deal reduces the UK's five mobile networks to just four


They will decide on a name for the combine within 18 months, although analysts believe the better known Orange brand will triumph.

Alexander insisted the deal will give the group the financial clout to take on current top two - O2, with 27 per cent of the market, and Vodafone, with 25 per cent.

He brushed aside concerns that the behemoth will damage competition in the UK market, as five mobile networks become just four.

The smallest player, Hutchison Whampoa's 3, which has an 8 per cent share of the market, will be dwarfed by the colossus. But Alexander believes the planned £3.5billion of cost- savings will help the group compete more vigorously with O2, owned by Spain's Telefonica, and Vodafone (up 2.3p at 136.8p).

The huge reduction in overheads raised fears that thousands of jobs will be cut from the combined 19,000 UK workforce, with hundreds of stores also set for closure.

Asked if all this pain would mean lower prices for customers, Alexander said: "I think it's fantastic news for customers because it will help us compete even more strongly in the market."

He added: "We consistently need to give better value to our customers and that's not just about price, it's also about better service." 

Competition regulators normally frown on mega in-market deals that create a powerful player with more than 25 per cent of the market.

Alexander insisted he does not expect to have to give up some market share because of competition concerns. "No we don't," he said. "We think this is great for competition and great for the consumer."

He insisted there were plenty of other companies operating with market shares of 37 per cent and more.

But when asked to name some, he could only name former monopolies like Deutsche Telecom, France Telecom, and Telefonica.

The venture, which will have debts of £1.25billion, will be hit with integration costs of £600million to £800million between 2010 and 2014.

Most watched Money videos