Deutsche Telekom and France Telecom announced today that they intended to merge their T-Mobile and Orange businesses in the UK into a joint venture, creating the UK's largest mobile operation with over 28 million customers.
The deal is due to be signed in November, and both T-Mobile and Orange should continue as separate brands for at least 18 months, after which we can expect to see some brand consolidation.
T-Mobile UK has been struggling for some time and has racked up substantial losses for its German parent, while Orange has diversified and now has significant interests in home broadband as well as mobile telephony.
Some business analysts think that this large-scale merger could lead to more mergers across Europe and worldwide. It has already happened in Australia where 3 and Vodafone merged their business, and indeed 3 has long been rumoured to be looking for a merger.
This type of thing is not new - Orange was originally owned by Hutchison who later went on to found 3, Hutchison sold it to Mannesmann of Germany, who then got taken over by Vodafone.. bringing Orange temporarily under the control of it's rival. Vodafone then sold Orange to France Telecom who still control it. T-Mobile UK was originally one2one, owned by Cable & Wireless before being sold to Deutsche Telekom. To make matters even more complicated, in the UK T-Mobile and 3 share a lot of their 3G infrastructure and it is uncertain where this new merger will leave 3 in the long term.
In the UK, T-Mobile has a reputation for poor coverage, and Orange has a reputation for poor customer service. Presumably, they are hoping to have T-Mobile's better customer service with Orange's decent coverage, rather than the alternative.
One question remains - if Orange and T-Mobile merge their infrastructure in a single joint venture, does that mean that one of the UK's mobile operator licenses will be up for sale? And if so, who would be interested in acquiring it? Watch this space..
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