February 21, 2010 6:41 pm

Orange and T-Mobile expect UK merger approval

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The parent companies of Orange and T-Mobile are increasingly confident of securing rapid regulatory approval in Brussels for a merger of the UK mobile phone businesses.

France Telecom and Deutsche Telekom think they have made sufficient concessions to the European Commission for it to approve the merger at the beginning of next month or sooner.

France Telecom’s Orange UK and Deutsche Telekom’s T-Mobile UK are planning to combine to form Britain’s largest mobile operator, with 29.5m customers.

The proposed merger has faced strong opposition from consumer groups who fear reduced competition will have negative consequences for mobile phone users.

The transaction would reduce the number of UK mobile network operators from five to four, with the combined Orange/T-Mobile entity overtaking Telefónica’s O2 UK subsidiary and Vodafone’s British business to become the market leader.

A significant development came late last week when an outline agreement on infrastructure sharing was reached between Orange, T-Mobile and 3, the UK’s smallest mobile network operator.

Regulators are concerned about whether 3, which has never reported a pre-tax profit, could compete effectively after consolidation in the mobile market.

3 already has a network-sharing deal with T-Mobile that provides both companies with significant cost savings. 3, owned by Hong Kong’s Hutchison Whampoa, is now planning to conclude an infrastructure-sharing agreement with the combined Orange/T-Mobile entity.

Meanwhile, France Telecom and Deutsche Telekom are hopeful their offer that the Orange/T-Mobile entity relinquish up to 25 per cent of its radio spectrum at the 1800 MHz bandwidth will also persuade regulators to approve the merger.

The 1800 MHz spectrum is suitable for a next generation wireless technology that will enable faster web surfing on mobiles.

O2 and Vodafone have been calling for the combined Orange/T-Mobile entity to relinquish some of the 1800 MHz spectrum.

All the mobile operators declined to comment, while the Commission said no decisions had been taken on whether to approve the merger.

However, people familiar with the situation said the Commission was increasingly likely to allow the merger to go ahead on the fastest possible timetable.

The Commission has the authority to approve the merger at the beginning of March after a seven-week long inquiry.

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