DT & FT Deepen Ties

7:00 AM -- It's springtime in Europe and love is in the air … at least it is for Deutsche Telekom AG (NYSE: DT) and Orange (NYSE: FTE), which have just taken the next step in their relationship and created a procurement joint venture. (See FT, DT Form Procurement JV.)

The Euro giants announced on Monday that they will combine their procurement activities for network gear, customer equipment, service platforms and IT infrastructure through the creation of a 50:50 joint venture, which will be set up in the fourth quarter of this year.

The operators estimate that the combined savings will be €1.3 billion (US$1.8 billion) annually after three years. The jointly owned and operated entity will have operational units in Bonn and Paris.

This joint venture follows the news that the two operators were looking for ways to cooperate in areas such as network sharing in Europe, Wi-Fi roaming and machine-to-machine (M2M) services. (See FT, DT Team on Customer Benefit.)

So what's the next step in the DT/FT relationship? Will they one day consummate their relationship in a full-blown merger? Such a cross-border merger would be messy, but not impossible.

The operators have certainly gotten much closer with today's joint venture plan. But such a collaboration -- combined sourcing of network, IT, and customer equipment -- could well give them much of the benefits of a merger, but without the pain. And for network equipment suppliers, this is yet another kind of consolidation that they will have to contend with. (See Eurosqueeze? and Orange, T-Mobile Do Everything Everywhere .)

— Michelle Donegan, European Editor, Light Reading Mobile