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Britain's mobile industry today faced its biggest shake-up since the first call was made in 1985 as T-Mobile and Orange agreed to the £7 billion merger of their operations in this country.
The merger, which is due to be finalised by the end of October, could lead to hundreds of job losses as France Telecom, which owns Orange, and Deutsche Telekom — T-Mobile's owner — look to cut their costs in the UK by £445 million a year by 2014.
After the UK's third and fourth largest mobile networks merge, the combined entity will be the country's largest network with 28.4 million customers and a 37% market share.
In the UK, Orange has 12,897 employees and T-Mobile 6,132. Between them they own 658 high-street shops and they said today that they would close stores as part of the cost cuts. Other cuts are likely to be in call centres and administrative areas with T-Mobile headquartered in Hatfield and Orange in Bristol. Major cost savings will also come from closing duplicate mast sites saving millions of pounds in rent. Eventually the joint venture could be floated on the London Stock Exchange.
Industry experts said that today's detailed agreement showed that the two companies were significantly down the line on a deal. One insider said: “There is a great intent to complete this deal.”
Analysts said the six weeks in which Orange and T-Mobile plan to do due diligence and draw up formal documentation could provide a narrow window of opportunity for O2 and Vodafone to come back with fresh bids for T-Mobile.
Each offered around £4 billion for it last month and were rejected by Deutsche Telekom on the grounds the offer was too low. But sources close to the number one and two operators in the UK said they were unlikely to come back with higher offers.
O2 and Vodafone would face much greater chances of being blocked by the Competition Commission because buying T-Mobile would take their market share to 43% and 40% respectively. Regulators are thought to be prepared to allow a deal which keeps market share below 40%.
The joint venture will be led by Brits with Tom Alexander of Orange as chief executive and Richard Moat of T-Mobile as chief operating officer.
The Orange and T-Mobile brands will continue to run separately for 18 months after the deal is done. Virgin Mobile — the fifth largest by customer numbers — is a virtual network operating over T-Mobile's system. It now has the option to shift but is said to be supportive of the merger.
Timotheus Höttges, chief financial officer of Deutsche Telekom, said: “We will become market leader — our customers will benefit in many ways, for example from the best mobile broadband offer in Britain.
“In the second biggest market in Europe, which is undoubtedly one of the toughest and most competitive, we are giving T-Mobile UK a clear and strong future.”
The combined network would have revenues of £7.7 billion and headline earnings of £1.7 billion. France Telecom and Deutsche Telekom both expect it to boost earnings by 2011.
Reader views (14)
My mates use to be on tmobile but becouse of the merge thay don't like orange so six of my mates have gone on to 02 and two are on vodafone myself is with 02 and 3 and I know people don't like three but I have a very good deal with them and with 02 the iPhone comes with unlimted Internet but I don't know about with there Internet for the iPhone last time read something on a blog before unlimted Internet 50 meg or someting like that any way and that was from orange so you have to look into it orange customers and I know with 02 you get free wifi from the cloud and bt openzone as 02 has a deal with them and it works out for there iPhone I don't like orange as use to be with them and the customer service is not that good and with this merge tmobile going to orange when you phone customer service I think you are going to be on the phone for a very long time and I think the service is going to be slow for Internet as it going to many on the network as I herd tmobile will be selling some of it masks or taken them down so I think it's not going to be good for customers and for choice of service providers so like if you want a new phone becouse there be only 02 torange vodafone and three.
- Graham, London, 09/10/2009 08:47
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Well there you have it Orange being greedy again as always thousands of job losses for the poor sods at T-Mobile less option and choice of networks for consumers and they went along to Apple like crying little spoilt brats to ask for the Iphone here when they have exclusive rights to it in the rest of Europe. In short grow up Orange I hope this deal of yours gets rejected, I was with Orange for 3 days and lets just say they were horrible to be with so I sent their phone back and went back to an O2 store and went back to them, after being with O2 since 1998 and only being with Orange for 3 days I would sooner stay with O2. In short this is not "NOT" a good deal.
- Martin, Liverpool, Merseyside, 06/10/2009 18:35
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This is old news, and has been on the cards since last year. However, I do agree that Tmobile should predominate.
I have had many years of great service from them after moving from Orange, I would not want to go back to Orange or go to Vodafone or O2 as they are just as poor in performance and especially customer service.
It's about time that Ofcom insisted on a regulated mobile transmission network that all operators must use, similar to Openreach for cables, but not run by McQuarry or NGW (the same thing anyway) as this would be a monopoly too far. This would ensure fair competition, provide standardised running costs and minimise mast development.
- Jenny, London UK, 06/10/2009 17:35
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In contrast to Jenny's opinion above, I do not agree that Tmobile should predominate. Their performance to the contrary has been very poor ever since they've allowed Virgin mobile to piggy back on then excellent one2one network. Orange customer service for premier users is excellent, and this should be made available to all users free of charge.
- Tony, London, 06/10/2009 17:35
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It is stated that between the Orange and T Mobile "0wn" 658 "high street shops between them. They dont. The majority are rented, it is the landlords that "own" these stores.In the battle for market domination over the years Mobile Phone companies negociated and took horifically high rents on leases in shopping centres purely to get a foothold in that area, now they cant afford them as the market has peaked, every phone shop has virtually the same phones for sale, with similar tariffs, this merger has averted a "financial crash" within the phone industry, and as I pointed out what do phone companies actually own, the stores are rented, the cars are on lease, the ownly "assets" are the intangables such as "goodwill" but when they close a store, they will have to keep paying the rent as you cannot walk away from a business lease without giving a lump sum to the landlord, so Orange will have to "dig deep" as this merger will "cost"
- Jim Allan, Lake District, 06/10/2009 17:35
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Let's hope it's a 'reverse takeover'. Never wanted the 'Orange' restrictions. Always found T-Mobile fine, over quite a few years and countries. Count me out, if it changes much.
- Steve, London, England, 06/10/2009 17:35
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Orange Customer Services is 2nd to none, quite simply the best out there. I hope for thier sake that they don't adopt the T-mobile culture where it's very common to remain on hold for 30 minutes, and to then be in contact with an agent reading off a script.
- Abi, London, 06/10/2009 17:35
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I'd rather they didn't merge. I would not want to have a phone that was T Mobile.
How can I put this politely. Hasn't T Mobile got a bit of a reputation of being the phone choice of chavs?
- Charles, Kennington, 06/10/2009 17:35
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Let us hope the competition authorities give this some serious scrutiny. The joyful use of the word "consolidation" by "analysts" can be translated as less competition leading to bigger profits at the expense of the consumer.
T-Mobile never seem to have quite got the hang of competitive pricing, although they seem to get high marks from their customers for service.
Incidentally, the best way of saving money is to buy your own sim-free phone and take advantage of the far better deals available with sim-only tarifs. The "free" phones that providers tempt us with are anything but.
- John Cochrane, Leatherhead, UK, 06/10/2009 17:35
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Will this mean that the special deals (One price for unlimited calls 24/7) offered by T Mobile to other EU countries except the UK will be offered to UK users? I bet it will not so surprise me T-Mobile.
- Carl Barron, Christchurch, Dorset, 06/10/2009 17:35
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Abi, London: I do hope that your comment is full of sarcasm and that you didn't truly mean that Orange's customer service is "second to none". I've been an Orange customer since 1997 and have always had to wait 10-15+ minutes before my call has been answered by an agent. I don't think any of these network providers offer customer service to be proud of.
- Kokopelli, Nottingham, UK, 06/10/2009 17:35
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@ Paul,
I disagree with there being too many operaors in the market. Most of these so called operators are virtual network providers, buying their capacity from the four big upsteam network operators. Without adequate governing body intervention, you can pretty much guarantee that once the merger has gone through, the lesser players in the market, the market power will shift in favour of the provider, leading to inevitable price shifts, curtailing of once free services and lesser power for us the consumer to do anything about it. This will be transmitted down through to the downstream providers too, who may well have to pay more for the access to the network. On the other hand the bigger company may surprise us all and with the cost saving brought about by scale, provide customers with greater access to data services, more competitive tariffs in order to entice customers from competitors etc.
- Mark, Muswell Hill, 06/10/2009 17:35
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I have had zero problems with Orange over years and I know friends who are desperate to get off T-Mobile because they say they have shoddy reception just about everywhere.
Perhaps T-Mobile should have spend more money on their
network instead of wasting it on those tedious Trafalgar Square chav sing-a-longs?
- Amy, London, 06/10/2009 17:35
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The colidation of the two Networks is long over due. There are to many operators in an already full market place.
Hopefully our bills will come down as well.
- Paul Radis, London, England, 06/10/2009 17:35
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