Orange and T-Mobile Merger Gets European Green Light

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

The European Commission has reportedly given the green light to the proposed Orange/T-Mobile merger, according to various media reports

The merger between Orange UK and T-Mobile UK looks likely to be finalised soon, after the deal was reportedly given the green light by the European Commission.

According to the Daily Telegraph and other newspaper reports, the Commission will agree to fast-track the merger which will create a 50:50 joint venture (JV) that will have almost 30 million customers, making it the largest mobile operator in the UK ahead of O2.

This follows last week’s news that the 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. Both parents said they were 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.

Following that concession, the Telegraph said that it understood that both the Office of Fair Trading and industry regulator Ofcom gave the signal to the Commission that they were comfortable there was not “sufficient detriment” to push further for a UK-based competition inquiry.

The Commission has until March 1 to decide whether to pass the inquiry back to the UK authorities, but the newspapers (quoting sources close to the situation) said the Commission would conclude this week that no further investigation is required, and that it will not ask UK authorities to look afresh at the UK angle.

Analyst Peter Boyland from IHS Global Insight certainly feels that the decision by Orange and T-Mobile to return some of the spectrum to Ofcom helped seal the deal.

“The JV was announced by France Telecom and Deutsche Telekom last September, chiefly in response to overwhelming competition in the UK mobile market, and a series of particularly poor performances by T-Mobile,” wrote the analyst in a research note. “The proposals initially raised a few eyebrows, as the JV would boast some 28.4 million customers, claiming a market share of some 37 percent, leapfrogging both Vodafone and current leader O2, which holds around a 27 percent share.

However there were concerns over the potential damage to the competition, as well as concerns about the effect of the merger on 3 UK, which has a network infrastructure-sharing deal with T-Mobile.

“However, the operators concerned recently offered to return up to 25 percent of their valuable 1800-MHz bandwidth spectrum allocation to Ofcom, and offered assurances the 3 UK deal would continue to be honoured – something which may have placated the regulators and sealed the deal,” wrote Boyland.

Boyland also wrote that the UK boasts the most competitive mobile market in the world, with five major global players holding 3G licences and growing MVNO and quad-play sectors. He wrote that the effects of the recession in the UK have now pushed competition to breaking point, and escalated a ferocious price war – and meaning some consolidation or casualties were inevitable.

The deal itself between Orange and T-Mobile has followed a torturous route for over a year now, since Deutsche Telekom put the unit up for sale in May last year. Vodafone reportedly considered a £3bn bid for T-Mobile UK in June, and so did O2. However, T-Mobile and Orange finally confirmed they intended to merge in November, after undergoing scrutiny from various competition agencies in the UK and Europe – including Ofcom.

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