The merger of Orange UK and T-Mobile UK will, in 18 months, see the closure of parts of the combined company’s joint retail estate. The optimised trading estate will also take a higher proportion of business direct, hitting the indirect mobile channels.
Orange and T-Mobile said deal will see better network coverage and shop availability to customers overall. But they added there will be a reduction in site rental expenses and shop numbers, and lower distribution costs as a result of a higher proportion of sales through the joint-venture’s own shops.
Savings will also come through joint marketing costs for a new brand, yet to be finalised, and also massive rationalisation of infrastructure and administrative functions.
Estimated opex-based synergies should reach an annual run rate of over £445 million from 2014 onwards, the pair said.
The joint venture expects to invest £600-£800 million in integration costs over the period from 2010 to 2014.
On the capex side, savings are expected over the first five years.
The potential for capital expenditure savings, net of integration capex, is estimated at £620 million on a cumulative basis over 2010-2014, prior to stabilising at approximately £100 million a year from 2015 onwards.