Deutsche Telekom and France Telecom UK arms to merge

Germany's Deutsche Telekom and France Telecom today announced their plans to merge their UK operations T-Mobile UK and Orange UK respectively, into a new 50:50 joint venture company, which would put the combined company as the top mobile phone operator in the UK.

The merger, which is expected by the end of October, will see the new company become the UK's leading mobile operator with a combined customer base of around 28.4 million and a market share of around 37 per cent, ahead of their largest rivals - Spanish group Telefonica's 27 per cent and Vodafone's 25 per cent.

Both Telefonica, operating in the UK under the brand 02 and Vodafone had reportedly made offers of around £3.5 billion for T-Mobile, which was below the latest book value of £4.5 billion and also below what Deutsche Telekom was expecting.

The joint venture agreement, which is expected to be signed by the end of next month and completed in 2010, comes as at a time when there is fierce competition in Europe's most competitive and saturated mobile market-the UK.

Both mobile operators will run their operations independently for 18 months after completion of the merger, while the new company management will look for a new brand for the joint venture.

Consumers in the UK will benefit by the expanded network coverage, enhanced network quality for both 2G and 3G services, and a larger network of shops and improved customer services, both companies said in a statement.