More information on the Orange/T-Mobile merger

l to r: Richard Moat, CEO T-Mobile UK; Gervais Pellissier, CFO of France Telecom; Timotheus Höttges, CFO of Deutsche Telekom; Tom Alexander, CEO Orange UK
l to r: Richard Moat, CEO T-Mobile UK; Gervais Pellissier, CFO of France Telecom; Timotheus Höttges, CFO of Deutsche Telekom; Tom Alexander, CEO Orange UK

It may have only been unveiled a matter of hours ago, but the PR teams at both T-Mobile and Orange have been busy assembling a veritable ream of information about the proposed merger of their two businesses. And some video too (at the end of this post).

First, some headline figures. As mentioned in the post earlier, the joint venture will create the UK’s biggest mobile operator – with an approximate 37% market share based on figures from the end of 2008. Orange have also revealed if you combined the 2008 figures from both operators you’d get revenue of approximately £7.7 billion, and EBITDA (profitability to you and me) of £1.7 billion.

People-wise, Richard Moat – T-Mobile UK’s current CEO, will take up the COO position, with the CEO hotseat being taken over by Tom Alexander, current CEO of Orange UK. Whilst it’s far too early to predict redundancies, there are already plans in place to reduce the number of retail outlets, and combine customer service, network and general/adminstration functions. These activities – along with the decommissioning of duplicate cell sites – is estimated to cost between £600m and £800m between 2010 and 2014.

Talking about cellsites and networks – most of that £600m-£800m cost will be taken up by decommissioning redundant duplicate radio network infrastructure. T-Mobile will contribute the 50% share of their joint radio network with Hutchinson 3G (3 to its friends and customers) to the pot, who incidentally already use Orange’s 2G network for fill-in coverage. Assuming T-Mobile and 3 put both their radio networks into the joint venture, you’ll end up with the interesting situation of 3 using a joint 3G network shared with Orange and T-Mobile, and a GSM network operated by Orange and T-Mobile.

Back to the subject of money, but still on the point of the shared 3G network currently (pre-merger) owned 50/50 by T-Mobile and 3, that’s clocked up gross tax losses so far of at least £1.5 billion. Looking at the bigger picture, France Telecom will be contributing, along with Orange UK, £1.25 billion of intra-group debt to the pot. Deutsche Telekom will then loan £625 million to the joint venture, which will be immediately paid back to France Telecom. After all is said and done, that leaves a joint debt of £1.25 billion, split 50/50 down the middle with £625 million of loans owed each to Deutsche Telekom and France Telecom.

So will the T-Mobile and Orange brands be disappearing from our High Street just yet? Not for a while, it seems. Both companies have committed to maintain separate brands for 18 months after the completion of the merger – so it could be at least a couple of years until we see a new (and as yet unnamed) ‘super brand’ hitting the mobile world.

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