Five Losers In The T-Mobile & Orange Merger

[mobaholic]

"Make no mistake, there will only be one winner in the Joint Venture between Orange and T-Mobile and it is unlikely to be the latter, Deutsche Telekom's shareholders, UK customers, Three Networks or Virgin Mobile.

But it is T-Mobile UK which is likely to be the biggest loser of them all for a number of reasons.  The company has been unable to compete with O2, Orange and Vodafone and Deutsche Telekom has been very reluctant to give Richard Moat, the newly appointed CEO, more time to turn the company around.

DT has already written down the value of the UK arm of T-Mobile by a staggering £1.6 billion and was reluctant to the same again had it gone forward with an outright sale valuing the company at £3.5 billion.

Furthermore, Deutsche Telekom will be lending the new venture £625 million, a move that has prompted some to say that DT is actually paying Orange to take on T-Mobile UK.

Furthermore, Deutsche Telekom will be lending the new venture £625 million, a move that has prompted some to say that DT is actually paying Orange to take on T-Mobile UK.

Employees and contractors are also going to big losers as staff numbers on both sides will be trimmed significantly as the joint venture will look to save as much as £3.5 billion over the next seven years.

The fate of T-Mobile's Joint Venture, Mobile Broadband Network Limited, is still unknown as the deal also includes T-Mobile's UK 50 percent holding in the entity.

Ditto for Virgin Mobile whose four million customers depend entirely on T-Mobile's network; details of the deal have yet to reveal whether the MVNO will be affected and if yes, how.

As for the UK public, well, put it this way, the top three networks will occupy 88.8 percent of the market by revenue and will serve 68.1 million customers.  This will squeeze out other smaller MVNO and smaller players like Three and Virgin Mobile.  Will prices rise?"

Source:-   ITProPortal.

Their comment:-

"We're a bit surprise to hear that both Virgin Mobile and Three networks are apparently very supportive of the deal for reasons which we fail to grasp.  The three big networks could form an informal cartel to defend their interests and raise prices or at the very least improve their bottom line by reducing the level of cut-throat competition".

Other articles:-

Orange and T-Mobile to merge  ( Guardian )

T-Mobile and Orange to create Britain's biggest mobile phone operator ( Telegraph )

British mobile phone revolution as Orange and T-Mobile confirm merger talks ( Times Online )

Mobile phone merger plans revealed ( Press Association )

T-Mobile and Orange Hook Up for UK Merger ( Sky News )

[andy]

As for the UK public, well, put it this way, the top three networks will occupy 88.8 percent of the market by revenue and will serve 68.1 million customers.  This will squeeze out other smaller MVNO and smaller players like Three and Virgin Mobile.  Will prices rise?"

Source:-   itproportal.com

Their comment:-

"We're a bit surprise to hear that both Virgin Mobile and Three networks are apparently very supportive of the deal for reasons which we fail to grasp.  The three big networks could form an informal cartel to defend their interests and raise prices or at the very least improve their bottom line by reducing the level of cut-throat competition".

I'd broadly agree with their sentiments, except that they've been rather  unobservant enough not to notice that prices have already been rising

Most main network payg rates have been on the way up to 20 pence a minute - notably including Virgin which recently abandoned the 5 minutes at 15p then 5p tariff that made them famous

and contract retention deals on all networks have got a lot less keen, especially O2 in the last 2 or 3 months - perhaps, it now makes you wonder, because they were hoping to pick up T-mobile's customers on the cheap

[Mikael]

I have to agree with Andy's view on this. Prices have already been going up. The demise of T-Mobile would make the UK market less competitive, especially for lower spenders. MVNOs may also struggle, as many have been hosted by T-Mobile. All in all bad for customers, but probably will increase demand for the services I'm offering!

[petkow]

Deutsche Telekom shaking off T-Mo UK to Orange reminds me a bit of how BMW got rid of Rover, who they called their "English Patient".

Your also completely right about the unhidden fact that UK networks have been tightening their belts significantly lately. My last batch of customer retention offers were not nearly as impressive as I have seen in the past.

As you point out though, the acceptable floor price for PAYG (pay as you go) has significantly increased.  Its not even been too long ago that several new operators (MVNO's) such as supermarkets have emerged in the PAYG sector. This much competition should really have resulted in a significant drop in PAYG prices across the board with the main networks and old heritage MVNOs like Virgin.  In countries like Germany and Spain, it is amazing what new players have achieved in terms of a massive drop in PAYG... to the extent it is almost always better having a PAYG over contract.

However I strongly suspect in the UK there might have been some price fixing going on between networks for some time. Lets see what any potential anti-competition enquiry into the Orange-TMobileUK tie up will uncover. Perhaps this is why the other networks are appearing to be happy with the tie-up?? (as stated at the end of the article). They just don't want to complain as an enquiry may just damage a lot of happy agreements?