Merger of T-Mobile UK and Orange UK cleared by EU Commission

Today, the European Commission informed Deutsche Telekom and France Telecom that it has granted clearance for the proposed merger of their UK-business operations. The implementation of the integration measures can start immediately. The closing of the transaction is expected in Spring.

Tim Höttges, CFO of Deutsche Telekom, said: “This is excellent news, for our customers, for our highly committed teams in the UK and for our shareholders. Now the way is clear for pooling our resources to create an outstanding high speed mobile broadband network in one of the most competitive markets in Europe. This joint venture company is based on a significant potential of synergies which create substantial value for the two shareholders and translate directly into customer benefits. Our teams in the UK will be rolling up their sleeves to roll out these benefits.”

Gervais Pellissier, deputy CEO and CFO of France Telecom, said: “We are delighted to receive the EU clearance on our project to create a joint venture with Deutsche Telekom in the United Kingdom. This clearance will allow us to create a strong operator and to offer high-quality network and services to our customers. By drawing on the resources of Deutsche Telekom and France Telecom, and on an experienced management and staff in the United Kingdom, we are confident that we will leverage on identified synergies and generate significant value for our shareholders.”

Deutsche Telekom and France Telecom offered to divest 2×15 MHz of their joint GSM spectrum (1800 MHz) by the end of 2011. Of the divested spectrum 2×10 MHz needs to be cleared by 30 September 2013 at the latest and further 2×5 MHz need to be cleared by 30 September 2015 at the latest. In addition, the existing network sharing deal with 3UK, owned by Hong Kong based Hutchison Whampoa, was reinforced.

As outlined back in September 2009, the new joint venture company is expected to generate estimated synergies with a net present value in excess of 4.0 billion euros (£3.5 billion). This continues to remain the case.

The new business will have pro forma 2009 revenues of approximately 8.5 billion euros (£7.57 billion) and EBITDA of 1.55 billion euros (£1.38 billion).

The board of the new joint venture company will have balanced representation from Deutsche Telekom and France Telecom. On the formation of the new business, Tim Höttges, CFO of Deutsche Telekom, will lead the board as non-executive chairman for two years after which time it will rotate to Gervais Pellissier for two years. The management team will be led by Chief Executive, Tom Alexander, currently CEO of Orange UK, and Richard Moat, currently CEO of T-Mobile UK, who will take on the role Chief Operating Officer.

The T-Mobile and Orange UK brands will continue to operate in the UK for at least 18 months after the completion of the transaction.

With a combined customer base of around 29.5 million the new joint venture company will be the number one player in the UK mobile market and it will be in a stronger position to invest in innovative services and to exploit new technologies. It will offer major customer benefits, including expanded network coverage, enhanced network quality for 2G and 3 G services, providing the platform for unparalleled mobile broadband offers as well as better customer proximity through a larger network of own shops and improved customer services.