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T-Mobile & Orange Merge UK Operations

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We didn't really see this one coming...

T-Mobile and Orange have announced today that they plan to merge their UK operations resulting in a massive joint company with 28.4m customers and 37 per cent market share. This would dwarf current leaders Vodafone and O2 which have 24.7 per cent and 27.7 per cent respectively.


"We will become market leader - our customers will benefit in many ways, for example from the best mobile broadband offer in Britain," said Deutsche Telekom {T-Mobile owner} CFO Timotheus Höttges. "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. And, with our partnership, we have taken the most value enhancing strategy for Deutsche Telekom and its shareholders."

"By combining our operations in the UK, we anticipate the long-awaited consolidation in one of Europe's most competitive markets, thereby creating a well positioned player," added France Telecom {Orange owner} CFO Gervais Pellissier. "This will reinforce fair competition and will provide strong benefits for our customers through improved coverage, quality of service and an enhanced capacity to develop new services and technologies. Our shareholders will benefit from higher profitability and an immediate cash flow per share accretion without impacting the overall indebtedness of the parent companies."

In practical terms, subject to approval, the two brands will remain separate for 18 months while they decide how to market the new business. Orange CEO Tom Alexander will head up the venture with T-Mobile UK CEO Richard Moat its COO. Costs of merging the duo is measured at roughly £600-£800m, but that it easily counteracted by claims of long term cost savings close to £3.5bn.

So a new giant is born. What will O2, Vodafone and little 3 do now...?

Links:
Orange Press Release
T-Mobile Press Release

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