Five Losers In The T-Mobile & Orange Merger

Make no mistake, there will only be one winner in the Joint Venture between Orange and T-Mobile and it is unlikely to be the latter, Deutsche Telekom's shareholders, UK customers, Three Networks or Virgin Mobile.

But it is T-Mobile UK which is likely to be the biggest loser of them all for a number of reasons. The company has been unable to compete with O2, Orange and Vodafone and Deutsche Telekom has been very reluctant to give Richard Moat, the newly appointed CEO, more time to turn the company around.

DT has already written down the value of the UK arm of T-Mobile by a staggering £1.6 billion and was reluctant to the same again had it gone forward with an outright sale valuing the company at £3.5 billion.

Furthermore, Deutsche Telekom will be lending the new venture £625 million, a move that has prompted some to say that DT is actually paying Orange to take on T-Mobile UK.

Employees and contractors are also going to be big losers as staff numbers on both sides will be trimmed significantly as the joint venture will look to save as much as £3.5 billion over the next seven years.

The fate of T-Mobile's Joint Venture, Mobile Broadband Network Limited, is still unknown as the deal also includes T-Mobile's UK 50 percent holding in the entity.

Ditto for Virgin Mobile whose four million customers depend entirely on T-Mobile's network; details of the deal have yet to reveal whether the MVNO will be affected and if yes, how.

As for the UK public, well, put it this way, the top three networks will occupy 88.8 percent of the market by revenue and will serve 68.1 million customers. This will squeeze out other smaller MVNO and smaller players like Three and Virgin Mobile. Will prices rise?

Our Comments

We're a bit surprise to hear that both Virgin Mobile and Three networks are apparently very supportive of the deal for reasons which we fail to grasp. The three big networks could form an informal cartel to defend their interests and raise prices or at the very least improve their bottom line by reducing the level of cut-throat competition.

Related Links

Orange and T-Mobile to merge

(Guardian)

T-Mobile and Orange to create Britain's biggest mobile phone operator

(Telegraph)

British mobile phone revolution as Orange and T-Mobile confirm merger talks

(Times Online)

Mobile phone merger plans revealed

(Press Association)

T-Mobile And Orange Hook Up for UK Merger

(Sky News)