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Deutsche Telekom, France Telecom sign mobile deal

A customer browses mobile phones on display at a T-Mobile store in London, England, on Monday. PHOTO: BLOOMBERG

Deutsche Telekom AG and France Telecom SA plan to merge their British mobile phone units to form what would be the country’s biggest mobile operator, the German company announced yesterday.

Deutsche Telekom said the two companies have entered exclusive negotiations on combining Deutsche Telekom’s T-Mobile UK with France Telecom’s Orange UK in a 50-50 joint venture.

It said the new company would have a customer base of some 28.4 million mobile phone users, or about 37 percent of UK mobile subscribers based on December figures.

That means the new company would overtake Britain’s current market leader, O2. Owned by Spain’s Telefonica, O2 has a 27 percent share of the market.

Vodafone is second with 25 percent of the market. Orange has 22 percent, T-Mobile 15 percent and Hutchison Whampoa’s 3 has 8 percent.

The proposed deal “is expected to create substantial value for both shareholders,” Deutsche Telekom said in a statement. It added that it expects the merger to generate synergies with a net present value of more than £3.5 billion ($US5.7 billion).

Signing of a deal is expected at the end of October, and its completion would be subject to approval by antitrust authorities, it said.

The business had combined 2008 revenue of some £7.7 billion and earnings before interest, tax, depreciation and amortization of £1.7 billion, Deutsche Telekom said.

Bonn-based Deutsche Telekom said it will contribute T-Mobile UK to the merged firm “on a cash-free, debt-free basis,” including the British unit’s 50 percent holding in a 3G network joint venture with Hutchison and gross tax losses carried forward of at least £1.5 billion.

France Telecom would contribute Orange UK, including £1.25 billion of intra-group net debt, “in order to equalize the value of the contributions to the joint venture,” the statement said.

Once the deal closes, Deutsche Telekom would grant a £625 million shareholder loan to the joint venture, which it said would be used to reimburse £625 million to France Telecom.

The joint venture would have total debt of £1.25 billion, represented by shareholder loans of £625 million each held by Deutsche Telekom and France Telecom, the statement said.
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