Deutsche Telekom and France Telecom plan to merge their U.K. operations to form the country’s largest cellphone operator, toppling Telefónica’s O2 from the top spot. The deal was announced early today and the companies said the merger and integration should generate estimated cost savings of over $5.7 billion, said the Wall Street Journal. Deutsche Telekom operates the T-Mobile brand, and France Telecom operates Orange. The two brands will run separately for 18 months after completion of the transaction, while a review of alternative brands is made. The board will be made up equally with representatives from the two. Plans include a management team led by Tom Alexander, chief executive of Orange U.K., as CEO and Richard Moat, CEO of T-Mobile U.K., as chief operating officer. The U.K. cellphone market is fiercely competitive, with four large operators vying for the wallets of subscribers. The joint venture would create a clear leader with a combined 30 million customers and about 38 percent of the market. O2 and #Vodafone Group are currently Nos. 1 and 2, with 27.1 percent and 23.6 percent market share by customers, respectively, according to Gartner. The deal is likely to be looked over by the U.K.’s Office of Fair Trading, which considers all combinations that would control more than 25 percent of a market, and possibly the European Commission. By combining, T-Mobile and Orange would gain a vast network of retail outlets, which is key in the battle for customers. In the U.S., T-Mobile is getting squeezed in the middle, as higher-end users wanting the latest phones and higher speed networks gravitate toward AT&T and Verizon Wireless, while people looking to save money go with cheaper pre-pay providers, such as MetroPCS Communications Inc. or Tracfone. France Telecom doesn’t operate a network in the U.S.
Telecoms Merge in Massive U.K. Cellular Deal
The deal was announced early today and the companies said the merger and integration should generate estimated cost savings of over $5.7 billion.
September 8, 2009