EC Clears Orange, T-Mobile UK Merger

The European Commission today gave a green light to the planned merger of Orange (NYSE: FTE)'s and Deutsche Telekom AG (NYSE: DT)'s UK subsidiaries, Orange UK and T-Mobile (UK) , which will create the largest mobile operator in the country.

When the deal is complete, the number of UK mobile operators will go from five to four. With nearly 30 million subscribers, the Orange-T-Mobile joint venture will be larger than market leaders Telefónica UK Ltd. and Vodafone UK . (See T-Mobile, Orange Join Forces in UK, Battle for T-Mobile UK Heats Up, T-Mobile Preps UK Revamp, and Vodafone Mulls T-Mobile Bid.)

The operators had to make two key concessions to win the approval from Brussels. The first is that the operators will have to amend the existing network-sharing agreement with Three UK , "to ensure that there remain sufficient competitors in the market," according to the Commission's statement. (See 3 & T-Mobile Share 3G in the UK.)

Second, Orange and T-Mobile will have to divest one quarter of their combined spectrum holdings in the 1800MHz frequency band. Together, the Orange–T-Mobile joint venture would hold 60MHz of contiguous spectrum at 1800MHz. Such a large block of spectrum would put the joint venture in an extremely advantageous position over its competitors, which was not acceptable to the European Commission.

"This could result in the new entity being the only MNO in the UK able to offer next-generation mobile data services through [LTE] technology at the best possible speeds within the medium term," noted the Commission in its statement today.

So, Orange and T-Mobile have agreed to divest 15MHz of that spectrum. Of that spectrum, 10MHz will have to be cleared by September 30, 2013 at the latest, and the remaining 5MHz will have to be cleared by September 30, 2015 at the latest.

Now, with today's EC approval, the companies can get down to creating the joint venture. Tom Alexander, currently CEO of Orange UK, will be the CEO of the new operator, while T-Mobile UK's CEO, Richard Moat, will take on the COO job.

The joint venture will have 2009 revenues of about €8.5 billion (US$11.5 billion).

But the company's individual brands aren't going away soon. The operators will continue to use their own brands for at least 18 months after the transaction is completed, which is expected to be in the spring.

— Michelle Donegan, European Editor, Light Reading Mobile