The European Commission has cleared the proposed merger of Orange UK and T-Mobile UK, after the two mobile operators agreed to conditions ensuring network access for the smallest operator 3 UK in the market. Orange and T-Mobile will also have to divest part of their 60MHz of spectrum in the 1800MHz band in order to go ahead with the merger creating the UK's largest mobile operator. The UK Office of Fair Trading said it was satisfied with the remedies and withdrew its request to review the deal after the mobile operators agreed to amend their network-sharing deal with 3. The commission said it found no direct competition concerns for services to end-users or the wholesale market, but the transaction could put at risk T-Mobile's network-sharing joint venture with 3 and 3's viability as a competitor on the UK market. In order to address the competition concerns, the parties agreed to undisclosed revisions to the agreement with 3 UK. The two operators' combined 1800MHz holdings would also give them a significant advantage over competitors, especially when it comes to deploying LTE services, the commission found. They have offered to divest 2x15 MHz of spectrum at the 1800 MHz level by the end of 2011. They will need to clear 2x10 MHz by 30 September 2013 at the latest and a further 2x5 MHz by 30 September 2015.
T-Mobile and Orange said the regulatory clearance will allow them to start work on integration immediately, and they expect to complete the transaction in the spring. The regulatory remedies are expected to have no impact on the project synergies of GBP 3.5 billion from the planned 50-50 joint venture. The new business will have pro forma 2009 revenues of approximately GBP 7.57 billion and EBITDA of GBP 1.55 billion, based on 29.5 million customers. The two operators will share management, with Deutsche Telekom CFO Tim Hottges to serve as non-executive chairman the first two years, followed by a two-year term for France Telecom CFO Gervais Pellissier. Orange UK CEO Tom Alexander will be CEO of the new company, and T-Mobile UK CEO Richard Moat will act as COO. The T-Mobile and Orange UK brands will continue to operate in the UK for at least 18 months after completion of the transaction.
The Communications Consumer Panel, an advisory body to UK telecom regulator Ofcom, said it was too early to say whether the merger would benefit consumers, without seeing the detailed analysis of the EC investigation. A more detailed and open investigation of the deal would have allowed for greater scrutiny of the merger and given consumers more confidence, the panel said in a statement.
