T-Mobile and Orange have announced they plan to merge their UK businesses which will create the largest mobile phone operator in the UK with 37% of the market or around 28.4 million customers. Deutsche Telekom and France Telecom, the owners of T-Mobile and Orange respectively will take a 50:50 share in the combined company. The next largest mobile providers are O2 with a 27% share and Vodafone at 25%. On Sunday Vodafone and O2 were reported to have put forward bids of around £3.5bn to purchase T-Mobile, however this would likely have undervalued the business.
The merger will reduce costs as the network can be rationalised with masts decommissioned where duplicate coverage is available and grown to provide expanded coverage. Retail outlets can also be consolidated to ensure the new company streamlines it's operations. Integration of the business could cost between £600m and £800m but savings of £3.5bn are expected over time. 12,500 people are employed by Orange and 6,500 by T-Mobile in the UK- It would be expected that cost savings would also be achieved by the merger and slimming of this. The companies also mention they will be able to invest further into newer technologies helping to provider better coverage and faster speeds for services such as mobile broadband.
Both brands will remain separate for the first 18 months whilst a branding review is performed. Tom Alexander, currently CEO of Orange UK will head the new company as CEO whilst Richard Moat, CEO of T-Mobile UK will take the COO role. The merger will have to be vetted by the Competition Commission here in the UK and Europe to ensure the deal is good for the market. If all goes to plan, the paperwork could be signed by the end of October.
Full details can be read in the joint press release.