Orange, T-Mobile To Swap Spectrum For Merger Approval

The planned merger between Orange UK and T-Mobile may be finalised earlier than expected, after parent companies France Telecom and Deutsche Telekom offered to sell off part of their combined radio spectrum in exchange of EC approval of the deal.

A person familiar with the situation told The Wall Street Journal that the two companies were hoping to get the European Commission’s clearance without having to face a drawn-out antitrust investigation by UK regulators. The commission is now consulting key players in the British mobile sector on the question of competition.

France Telecom and Deutsche Telekom claim they are prepared to relinquish up to 25 percent of the spectrum they hold at the 1800 MHz bandwidth – which is capable of supporting 4G wireless technology. They have also offered some concessions over network sharing to 3, the UK’s smallest operator.

However, this arrangement would still leave the Orange/T-Mobile entity with the bulk of the 1800 MHz spectrum, giving it a significant advantage over UK other networks – such as O2 and Vodafone – that also want to offer faster mobile web browsing. Insiders told the Financial Times that rival operators did not believe Orange and T-Mobile were proposing to give up enough spectrum.

Deutsche Telekom and France Telecom first announced plans for a 50-50 joint venture in September 2009 and finally confirmed the intended merger in November, having undergone scrutiny from various competition agencies in the UK and Europe – including Ofcom. The merger will create the country’s largest mobile network, with over 30 million customers and a reported market share of 37 percent.

The companies said in November that they expected to close the deal in the first half of 2010. However, if the European Commission accepts an offer from the UK’s Office of Fair Trading (OFT) to review the proposed joint venture, the process could take much longer. The European Commission has until March 1 to consider its course of action.

In the meantime the Commission has sent out questionnaires to all the main UK mobile operators, asking whether the proposals relieve some of their concerns. However, none of the companies have commented on the issue so far.