Telekom and France Telecom today announced that they have entered into exclusive
negotiations to combine T-Mobile UK and Orange UK in a new 50:50 joint venture
company. The new joint venture will create the UK's leading mobile operator. It
will have a combined mobile customer base of around 28.4 million, representing
approximately 37 percent of UK mobile subscribers, based on figures at end
December 2008. By integrating Orange's broadband activities, the joint venture
will also have the capabilities to offer convergent solutions to its customers
in the future.
It's said, that this combination will bring substantial benefits to UK
consumers. It will result in expanded network coverage and enhanced indoor and
outdoor network quality for 2G and 3G services, as well as better customer
proximity through a larger network of own shops and improved customer services.
The combination will place the joint venture in a better position to invest in
innovative new services and to exploit new technologies. The new enlarged
business will also be able to compete more effectively with the other two large
mobile operators in the market.
Timotheus Höttges, CFO of Deutsche Telekom, said: "We will become market
leader - our customers will benefit in many ways, for example from the best
mobile broadband offer in Britain. In the second-biggest market in Europe,
which is undoubtedly one of the toughest and most competitive, we are giving
T-Mobile UK a clear and strong future. And, with our partnership, we have
taken the most value enhancing strategy for Deutsche Telekom and its
Gervais Pellissier, CFO of France Telecom said: "By combining our
operations in the UK, we anticipate the long-awaited consolidation in one of
Europe's most competitive markets, thereby creating a well positioned
player. This will reinforce fair competition and will provide strong
benefits for our customers through improved coverage, quality of service and
an enhanced capacity to develop new services and technologies. Our
shareholders will benefit from higher profitability and an immediate cash
flow per share accretion without impacting the overall indebtedness of the
The Board of the new joint venture company will have balanced representation
from Deutsche Telekom and France Telecom. The management team would be led by
Tom Alexander, currently CEO of Orange UK, as CEO and Richard Moat, currently
CEO of T-Mobile UK, as COO. The governance of the joint venture would attribute
extensive operational decision-making to the management team.
The T-Mobile UK and Orange UK brands will be maintained separately for 18
months after completion of the transaction. During that period management will
review branding alternatives for the joint venture and will develop a new
branding strategy recommendation for shareholder approval.
This transaction is expected to create substantial value for both
shareholders and to be accretive from 2010 in terms of free cash-flow per share
and from 2011 in terms of earnings per share. Both Deutsche Telekom and France
Telecom would recognize their respective interest in the joint venture using the
equity method after closing. It is planned that the joint venture will
distribute 90 percent of its free cash flow to its two shareholders.
Prior to the signing, which is expected to be end of October, both Deutsche
Telekom and France Telecom will undertake confirmatory due diligence and will
complete the definitive documentation. The final agreement is subject to the
approval of the Supervisory Board of Deutsche Telekom and the Board of Directors
of France Telecom, and the completion of an agreed transaction would be
conditional on approval by the relevant competition authorities.
Cheers ~ Arne