14 DAY TRIAL // Deutsche Telekom and France Telecom have agreed on plans to merge their operations in the UK, namely T-Mobile UK and Orange UK. As many of you might already know, the companies announced about two months ago that they were negotiating a possible merger of the two wireless operators, and it seems that now the agreement has been finally put in place.
The two announced on Thursday the signing of a formal agreement for combining their network operations in the UK. Deutsche Telekom chief financial officer said the following to Reuters, “Deutsche Telekom and France Telecom have committed themselves to a long-term partnership with this joint venture contract.”
The agreement is reportedly aimed at the creation of a 50:50 joint-venture. According to the deal, Deutsche Telekom will contribute T-Mobile UK on a cash-free, debt-free basis to the newly formed entity (T-Mobile UK's 50 percent holding in a 3G network joint venture with Hutchison, as well as gross tax losses of around £1.5 billion are included). At the same time, France Telecom will contribute the whole of Orange UK to the venture (£1.25 billion of intra-group net debt included).
As the companies indicate, the agreement is still subject to regulatory approval. However, it should be mentioned that the new joint venture will become the leading carrier in the UK, outpacing the current leader, Telefonica O2 UK. At the moment, O2 has a market share of around 27 percent in the country, followed by Vodafone with 25 percent, Orange with 22 percent and T-Mobile with 15 percent.
The joint venture is expected to account for around 37 percent of the mobile market in the UK, and to have a number of around 28.4 million customers. In addition, the entity should have revenues of €9.4 billion (£7.7bn), while its EBITDA should be of €2.1 billion (£1.7 bn). The merger is also expected to generate savings of around €4 billion (£3.5bn).