Telecomms merger

Deutsche Telekom and France Telecom have entered into exclusive negotiations to combine their T-Mobile UK and Orange UK operations in a new 50:50 joint venture company.


Leading telecommunications companies Deutsche Telekom and France Telecom have entered into exclusive negotiations to combine their T-Mobile UK and Orange UK operations in an equal joint venture company.


The new joint venture would have a combined mobile customer base of around 28.4 million, representing approximately 37 per cent of UK mobile subscribers.


The companies claim that the merger and integration of T-Mobile UK with Orange UK should generate estimated synergies with a value in excess of €4bn (£3.5bn).


To create the new joint venture, Deutsche Telekom plans to contribute T-Mobile UK on a cash-free, debt-free basis, including T-Mobile UK’s 50 per cent holding in its 3G network joint venture with Hutchison and gross tax losses of at least £1.5bn. France Telecom will contribute the whole of Orange UK including £1.25bn of intra-group net debt.


The board of the new joint venture company will be led by Tom Alexander, currently chief executive of Orange UK, who would assume the role of chief executive, and Richard Moat, currently chief executive of T-Mobile UK, who would assume the role of chief operating officer. 


The T-Mobile UK and Orange UK brands will be maintained separately for 18 months after the transaction is completed. During that time, the management will review branding alternatives for the joint venture and will develop a new branding strategy for approval by the company’s shareholders.


The final agreement is subject to the approval of the Supervisory Board of Deutsche Telekom and the Board of Directors of France Telecom. The completion of the transaction would also be conditional on approval by the relevant competition authorities.