|
T-Mobile and Orange to merge
2009-09-08
FRANKFURT (AFP) - Deutsche Telekom and France Telecom will seek to combine T-Mobile UK and Orange UK in a jointly owned entity, the German telecommunications group said Tuesday in a statement Tuesday, confirming rumours that had circulated for several days. A deal would thwart a bid by rival Vodafone to gain the upper hand in Europe's second biggest mobile market through its own purchase of Deutsche Telekom's T-Mobile UK subsidiary, and investors in Frankfurt hailed the news. Deutsche Telekom and France Telecom have launched exclusive talks to merge their British units into Britain's top mobile operator, the German telecommunications group said Tuesday in a statement. With some 28.4 million clients, the new operator would have a 37 percent market share of the British mobile sector, making it the biggest mobile operator, it added. The current leaders are 02, owned by Telefonica of Spain, with 27.7 percent, and Vodafone, with 24.7 percent. Pro forma revenues for T-Mobile UK and Orange UK together last year amounted to around 7.7 billion pounds, the statement said, with core earnings of around 1.7 billion pounds. The combined company was expected to generate cost savings in excess of 3.5 billion pounds, it added. Under the proposed tie-up both brands would be maintained separately for 18 months following the deal's completion while a review of alternative brands is made, the statement said. Orange UK chief executive officer Tom Alexander was to take on the same post at the new company and would be seconded by T-Mobile UK CEO Richard Moat, it added. The operation was expected to cost between 600-800 million pounds from 2010-2014 but also result in capital expenditure savings of 620 million pounds during that period. Around 100 million pounds per year would be saved from 2015 onwards, the statement said. The deal must still be approved by both groups' supervisory boards and by competition authorities. A contract finalising the deal was expected to be signed by the end of October. Deutsche Telekom has tried for months to find a partner for its troubled British unit, as it did not want to bear the costs of restructuring the operator alone. The parent group had booked an impairment charge of 1.8 billion euros related to T-Mobile UK in its first quarter and said all options regarding the unit were open. On Tuesday, Deutsche Telekom chief financial officer Timotheus Hoettges was quoted as saying that a merger would give T-Mobile "a clear and strong future" in what "is undoubtedly one of the toughest and most competitive" mobile markets. France Telecom counterpart Gervais Pellissier added that the tie-up anticipated a "long-awaited consolidation" among British mobile operators. The main loser appeared to be Vodafone, which is set to fall to number three in the British market after posting poor results for its fiscal year that ended in March. The world biggest mobile phone company by revenues said in May that net earnings had shed 53.8 percent to 3.08 billion pounds and warned that the outlook remained "challenging" as a result of increased competition. Analysts were muted in their reaction to the merger however, with Gartner's Martin Gutberlet saying that it would not necessarily solve T-Mobile problems. "Market share is not the key to make operations more profitable," Gutberlet said. ETX Capital trader Mark Priest commented that "the deal may suit all parties. "On a macro level this is another sign that we may be moving into a period of sustained M&A (mergers and acquisition) activity as firms look to realise cost savings through consolidation," Priest added. Frankfurt investors appeared to approve however, and Deutsche Telekom shares gained 2.33 percent in morning trading while the DAX index of German blue-chips was up by 0.66 percent overall. - Dow Jones Newswires contributed to this story -
| 
