Deutsche Telekom and France Telecom announced today they will be combining T-Mobile UK and Orange UK into a new joint-venture company. The resulting entity will become the UK's leading mobile carrier with 28.4 million large customer base, representing approximately 37% of UK mobile subscribers.
According to the merger statement, the joining of the two will only bring positives 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 center proximity through a larger network of own shops with improved customer services.
Yet, the T-Mobile UK and Orange UK brands will be maintained separately for 18 months after completion of the merger. During that period management will review branding alternatives for the joint venture and will develop a new branding strategy.
To create the new joint venture, Deutsche Telekom would contribute T-Mobile UK on a cash-free, debt-free basis and gross tax losses carried forward of at least £1.5 billion. France Telecom would contribute the whole of Orange UK including £1.25 billion of intra-group net debt in order to equalize the value of the contributions to the joint venture.
Immediately after closing Deutsche Telekom would grant a £625 million shareholder loan to the joint venture, which would be used to simultaneously reimburse £625 million to France Telecom.
As a result, the joint venture would have indebtedness of £1.25 billion, represented by two shareholder loans of £625 million held by each of Deutsche Telekom and France Telecom.
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