T-Mobile and Orange joint venture to have 37pc of UK market

T-Mobile and Orange are on Tuesday expected to announce a deal to create the UK's largest mobile phone operator.


By Rupert Neate, City Reporter


T-Mobile and Orange joint venture to have 37pc of UK market

The new operator will have more than 30m customers and push O2 and Vodafone, which had launched unsuccessful bids to buy T-Mobile UK, into second and third place.

It is understood that the joint venture will be majority-owned by France Telecom, the owner of Orange, unless Deutsche Telekom, T-Mobile's parent, makes a cash payment to France Telecom to make up for the fact that Orange has more customers than T-Mobile.
It is expected that Orange and T-Mobile will continue to be run as separate business, and both brands will be retained, but the operators will share infrastructure and back office functions.

The joint venture will have 37pc of the British market, ahead of O2 with 27pc and Vodafone with 25pc. At present Orange has a 22pc share and T-Mobile has 15pc. The deal is likely to come under intense scrutiny from competition regulators at Ofcom, the communications watchdog, and European Union.

The move follows speculation that Vodafone and O2 's Spanish parent Telefonica had submitted bids of about £3.5bn-£4bn for T-mobile UK, which has been struggling to compete in the fiercely competitive British mobile phone market.

Deutsche Telekom chief executive Rene Oberman reportedly rejected the bids because the offers were too low. Deutsche Telekom has already taken a €1.8bn (£1.6bn) writedown against its British operation and would have been forced to make a further writedown if it had accepted a £3.5m offer from Vodafone or Telefonica.

It is understood that Mr Oberman and Didier Lombard, France Telecom's chief executive, signed the deal on Monday night and it could be announced to the market as early as Tuesday morning, but sources suggest it could be delayed due the complexity of the agreement.

Mr Lombard was due to give a keynote speech at Broadband World Forum in Paris on Monday, but pulled out at the last minute in order to work on the deal.

The paperwork is very preliminary and does not include what will happen to Virgin mobile, which runs on T-Mobile's network and accounts for about 25pc of the German operator's British customers.

The deal could also raise serious questions about the survival of 3, Britain's smallest network, as it has recently entered into a deal to a network-sharing deal with T-Mobile.