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Orange/T-Mobile tie-up set to be approved at European level
21 Feb 2010 | 19.06 Europe/London
The European Commission is on the verge of putting its seal of approval onto the proposed merger between the UK's third and forth biggest mobile operators - but rival firms could yet put a spanner in the works.
The news that Orange and T-Mobile had agreed to marry first emerged in September last year in a move that would create the largest mobile phone company in the country, boasting nearly thirty million customers on its combined books. The new Orange T-Mobile venture would also control the bulk of the attractive 1800Mhz slice of the spectrum in the UK, which is apt for fourth generation wireless technology (4G) and thereby well-suited to fast web browsing on mobile phones.
It's therefore no surprise that one of the main concerns held by the competition authorities was that Orange T-Mobile would have too much of a stranglehold on the British wireless spectrum, which is a scarce and finite resource. (Of course, it's also seen as a potential wireless gateway to helping the Government reach its stated Universal Service Commitment of 2Mbit/s for everyone in the country by 2012.)
The other was about the future of rival network 3, which had an infrastructure-sharing deal in place with T-Mobile. It's been seen as having helped drive prices down for consumers through competition - despite near having managed to turn a pre-tax profit itself - and had been counting on this network-sharing agreement to keep costs down.
Driven by worries over a lengthy, in-depth investigation being launched by the Office of Fair Trading, Orange and T-Mobile have proved willing to make concessions to the European Commission. The OFT has already made a formal request to be granted jurisdiction over the matter and the commission has until the start of March to decide whether it's necessary. The owners of Orange and T-Mobile have been doing their damnedest to make sure it's not.
By way of bargaining, France Telecom and Deutsche Telekom have offered to give up a quarter of their accumulated share of the 1800Mhz spectrum. While according to The Financial Times insiders say the people who pull the strings at O2 and Vodafone don't think that's nearly enough, it seems it could be enough to satisfy Brussels.
Last-ditch negotiations over the weekend also appear to have led to a deal to secure the future of 3. The firm, which is owned by Hutchinson Whampoa of Hong Kong, has now signed a deal with Orange and T-Mobile that will grant it access to three thousand more mast sites across the country. With this bringing the total up to sixteen thousand, what that adds up to is the biggest 3G network in Britain.
The OFT is scheduled to tell the stock exchange why it wants to do some digging around the merger tomorrow. Handily, newspaper The Observer says it's had a sneak peek at the script for the announcement, part of which reads: "The OFT considers that any weakening/elimination of Hutchison 3G would effectively result in a reduction of vertically integrated competitors from five to three and cause significant detriment to competition in mobile retail telephony."
While it looks like Orange and T-Mobile will sidestep the rigours of an OFT investigation, O2 and Vodafone may yet decide to kick up a fuss around the issue of who controls how much of the 1800Mhz spectrum bandwidth. With the companies reportedly "lukewarm" about the proposals that have been laid out on the table, things could yet hot up for what may become Orange T-Mobile.
Competition concerns
The news that Orange and T-Mobile had agreed to marry first emerged in September last year in a move that would create the largest mobile phone company in the country, boasting nearly thirty million customers on its combined books. The new Orange T-Mobile venture would also control the bulk of the attractive 1800Mhz slice of the spectrum in the UK, which is apt for fourth generation wireless technology (4G) and thereby well-suited to fast web browsing on mobile phones.
It's therefore no surprise that one of the main concerns held by the competition authorities was that Orange T-Mobile would have too much of a stranglehold on the British wireless spectrum, which is a scarce and finite resource. (Of course, it's also seen as a potential wireless gateway to helping the Government reach its stated Universal Service Commitment of 2Mbit/s for everyone in the country by 2012.)
The other was about the future of rival network 3, which had an infrastructure-sharing deal in place with T-Mobile. It's been seen as having helped drive prices down for consumers through competition - despite near having managed to turn a pre-tax profit itself - and had been counting on this network-sharing agreement to keep costs down.
Baby give it up
Driven by worries over a lengthy, in-depth investigation being launched by the Office of Fair Trading, Orange and T-Mobile have proved willing to make concessions to the European Commission. The OFT has already made a formal request to be granted jurisdiction over the matter and the commission has until the start of March to decide whether it's necessary. The owners of Orange and T-Mobile have been doing their damnedest to make sure it's not.
By way of bargaining, France Telecom and Deutsche Telekom have offered to give up a quarter of their accumulated share of the 1800Mhz spectrum. While according to The Financial Times insiders say the people who pull the strings at O2 and Vodafone don't think that's nearly enough, it seems it could be enough to satisfy Brussels.
Last-ditch negotiations over the weekend also appear to have led to a deal to secure the future of 3. The firm, which is owned by Hutchinson Whampoa of Hong Kong, has now signed a deal with Orange and T-Mobile that will grant it access to three thousand more mast sites across the country. With this bringing the total up to sixteen thousand, what that adds up to is the biggest 3G network in Britain.
The future's bright?
The OFT is scheduled to tell the stock exchange why it wants to do some digging around the merger tomorrow. Handily, newspaper The Observer says it's had a sneak peek at the script for the announcement, part of which reads: "The OFT considers that any weakening/elimination of Hutchison 3G would effectively result in a reduction of vertically integrated competitors from five to three and cause significant detriment to competition in mobile retail telephony."
While it looks like Orange and T-Mobile will sidestep the rigours of an OFT investigation, O2 and Vodafone may yet decide to kick up a fuss around the issue of who controls how much of the 1800Mhz spectrum bandwidth. With the companies reportedly "lukewarm" about the proposals that have been laid out on the table, things could yet hot up for what may become Orange T-Mobile.