Monday, 14 September 2009

Ongoing thoughts on T-Mobile/Orange merger in the UK

I've obviously been giving some thought to the implications of the T-Mobile/Orange merger in the UK. I'll be posting a selection of thoughts over the course of the next few days.

As a first off, the thorny issue of competition will have to be resolved. EU and UK authorities will probably get involved. I think that at an EU level the merger doesn't represent anything new. Across EU markets an operator with 43% market share* is hardly unusual. Most markets have such a primate operator, although usually it's the former incumbent. For more analysis of this, see the piece I wrote for Analysys Mason: Orange–T-Mobile merger brings UK competition levels into line with other European markets. At the UK level, it could be that this becomes a political hot potato. There are quite a lot of job losses implicit in the merger plans. We're in a recession. There's going to be an election in the next 9 months. That could scupper the deal, or at least delay it until after May's poll.

*The T-Mo/OR press release claims 37% vs 27% for O2, but that's a little bit naughty. You can't exclude your MVNOs for your subs figures if you choose to include O2 and Vodafone's.


  1. I don't know how one can determine whether this reduces competition without knowing the intentions of the new joint venture. To take the area I'm most interested in, mobile broadband, T-mobile has a PAYG deal, and Orange hasn't. If the T-mobile PAYG deal is withdrawn, competition with other PAYG offerings is reduced (and I get annoyed).

    An amusing irony is that my Orange mobile phone is on a weird PAYG deal that matches T-mobile's PAYG offering. I was offered this in the Orange shop when I bought my phone. I said I didn't want to pay a monthly subscription, and they said they could match a deal that T-mobile was offering.

    Here's the irony. Every so often Orange sends phone customers a text to tell them whether they are on the best plan for their usage. Invariably I am told that my 'T-mobile match' is the best for me. It's reassuring to know from Orange that none of its own deals would be better.

  2. Reassuring indeed. Fewer operators by definition means less competition, but that doesn't necessarily mean worse deals. It might just mean that the acquisition merry-go-round cools a bit and the unsustainably high device subsidy levels are reduced a bit.

  3. Fewer Networks does not mean fewer Operators. 5 Networks is unsustainable and was already heading towards 4 with the 3/T-Mobile 3G tie-up.

    A JV respresents the least compromised of all the 'Network Sharing' ideals, since it all boils down to an entity managing the network with all assets pooled, and (one or more) marketing entities providing access to that network to subscribers. It may trigger O2 and Vodafone to maximise the potential of their site-sharing deal.

    Were Orange and T-Mobile to both 'independently' market the network they could leverage the reduced cost-base to be more competitive in the market-place.

    Jobs will be lost, but market prices may not necessarily rise as a result of the merger.