Orange/T-Mobile presses EC for JV

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France Telecom and Deutsche Telekom, parents of Orange and T-Mobile, have offered to relinquish up to 25 per cent of their valuable 1800MHz spectrum in an attempt to speed up regulatory approval for their proposed UK network joint venture.

The pair are looking to accelerate the regulatory process by the European Commission by ceding spectrum to rival firms and pre-empting the likely sticking point for the project.

The proposed joint venture, announced in September, would see the pair combine their infrastructure and customer bases, and leapfrog O2 to lead the UK market with around 37 per cent share and 28.4 million customers.

Leading network operators in only two European countries have smaller shares of their respective markets than Orange/T-Mobile would enjoy in the UK and, despite concern from Ofcom and the Office of Fair Trading in the UK, the proposed merger is considered unlikely to be faced with barriers in Brussels from the point of view of its customer share.

Instead, rival firms have looked to delay progress on the basis of spectrum, and the joint-venture’s monopoly of the 1800MHz band, which is well suited to 4G services and fast mobile broadband.

It is understood the new proposals handed Brussels last week are considered insufficient by O2, Vodafone and 3, which are fighting for the pair to cede closer 50 per cent of their shared 1800MHz spectrum.

However, Orange and T-Mobile have also proposed T-Mobile’s network sharing programme with 3 in the UK, which will see the pair share 13,000 cell sites by October, should continue with the conjoined operator business.

The concern for Orange and T-Mobile is the European Commission will respond to calls from the Office of Fair Trading for an investigation into the project, which could delay it by several months. Reports claim they hope to secure regulatory approval by the end of March.

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 3 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.

 

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