LONDON: Deutsche Telekom AG and France Telecom SA said on Tuesday they intend to combine their British mobile phone units — shaking up the country’s intensely competitive market and forming the country’s biggest mobile operator.
Deutsche Telekom said it has entered exclusive negotiations on combining its struggling British unit T-Mobile UK with France Telecom’s Orange UK in a 50-50 joint venture.
The tie-up could benefit all operators in Britain’s already crowded mobile telecommunications sector by reducing the pressure to cut prices, though mergers inevitably will mean job losses.
“This is another sign that we may be moving into a period of sustained M&A activity as firms look to realize cost savings through consolidation,” said Mark Priest, a trader at ETX Capital in London.
The announcement follows reports that Telefonica of Spain, owner of current UK market leader O2, and No. 2 Vodafone Group PLC had made informal offers of about 4 billion pounds ($6.5 billion) for T-Mobile.
The combined company would have a customer base of 28.4 million mobile phone users, or about 37 percent of UK mobile subscribers at the end of 2008.
That would overtake O2, which has a 27 percent share of the British market. Vodafone is second with 25 percent.
Orange has 22 percent, T-Mobile 15 percent and Hutchison Whampoa’s 3 has 8 percent.
The market reacted positively: France Telecom shares were up 5.2 percent at €18.77, Deutsche Telekom rose 2.6 percent to 9.64 euro, and Vodafone gained 2.2 percent to 137.45 pence.
