Orange UK parent France Telecom and T-Mobile UK parent Deutsche Telekom have today submitted their proposal to the European Commission to combine their UK operations in a 50/50 joint venture.
T-Mobile said in a statement: “The parent companies of mobile communications companies Orange and T-Mobile today filed their proposal for a joint venture in the UK to the European Commission. The European Commission will now review the proposal.”
France Telecom and Deutsche Telekom want the European Commission to rule on the merger because it could come to a conclusion faster than the UK watchdogs.
O2 and 3 told The Financial Times that UK competition authorities are better placed to look at the joint venture. Vodafone too believes UK authorities are keen to scrutinise the merger.
In a recent report, Ofcom said UK consumers were well served thanks to competition between the five carriers, but that the situation could change if the merger gets approval.
“The proposed merger between T-Mobile and Orange may well have significant implications for the conclusions set out in this document and for our future work programme,” it said.
Ofcom expects to provide input to the European Commission – or the Office of Fair Trading if the European Commission refers it to the local competition authority in the UK.
Rival networks claim the merged entity should at least be made cede spectrum if the proposal is to gain approval.
O2 UK chief Ronan Dunne says the joint venture should give up some of that spectrum because it’s well suited for 4G.
3 UK boss Kevin Russell also told The Financial Times that “a concentration of 1800 MHz spectrum in the hands of one entity will distort the development of a competitive mobile broadband market in the short- and medium-term”.
Deutsche Telekom is to contribute T-Mobile UK on a cash-free, debt-free basis to the venture, including T-Mobile UK’s 50 per cent holding in its 3G network joint venture with Hutchison and gross tax losses carried forward of at least £1.5 billion.
France Telecom is to contribute the whole of Orange UK including £1.25 billion of intra-group net debt in order to equalize the value of the contributions to the joint venture.
The new network operation will immediately leapfrog market leader Telefonica O2 UK into first place in the market, with around 37 per cent share and 28.4 million customers. Combined, the venture will have revenues of €9.4 billion (£7.7bn) and EBITDA of €2.1 billion (£1.7 bn)
The merger and integration of T-Mobile UK with Orange UK should generate savings in excess of €4 billion (£3.5bn).
O2 has around 27 per cent, Vodafone has 25 per cent, Orange has 22 per cent and T-Mobile has 15 per cent at present.