T-Mobile for Merger with Orange, as O2 and Vodafone Make £3.5bn Bids
It is very much unlikely that Rene Obermann, the chief executive of T-Mobile would agree upon the GBP 3.5 billion bids made by both O2 and Vodafone for acquiring the UK assets of T-Mobile. The situation is significant because, T-Mobile with its 14.9 per cent of mobile revenues share, at present comes in the fourth place in the mobile broadband market of the United Kingdom, just behind Orange UK. This says that anyone of the dominant duo (Vodafone and O2) winning the battle will create a mobile broadband network that would nothing less than dominate the relevant market of the UK.
However, the major contenders are also having their share of problems in going all out to seize the opportunity. This is evident from their making relatively low conditional bids such as of GBP 3.5 billion that are believed to be much below the price sought by Obermann. Experts think that that if Obermann sells T-Mobile UK for 3.5 billion, he would probably require to make one more write-down on the mobile division that has been already subjected to a write-down of 1.6 billion earlier in 2009. This fact also makes the experts think that Obermann’s not accepting any of the approaches can also be a possibility in the circumstances.
Moreover, the German owner of T-Mobile, Deutsche Telekom, is also much inclined towards a merger with France Telekom owned Orange, mainly for the reason that the cash bids by the big companies were lower than the expectations of the UK mobile broadband provider. Besides, the two merging companies could pool their networks conveniently, saving considerable money. However, striking such a deal would largely depend on the claim put forth by Orange. It is believed that Orange would demand a majority stake, for its being the larger mobile broadband network operator.
The problems faced by the dominant duo – Vodafone and O2 – start from the certainty that anyone that strikes a deal with T-Mobile is likely to be forced to shed some of the spectrum that was granted to the pair when they had started their broadband services in the 1980s. Another reason for the low bids is that about one fourth of T-Mobile’s customer base belonged to Virgin Mobile, the mobile division of Virgin Media, which uses the network of the former to run its mobile services. Lastly, but definitely not the least, any of the two dominant networks who emerges to acquire T-Mobile assets in the country would get elevated to above 40 percent of the UK market, and thereby falls target to a lot of scrutiny by the regulator.
Meanwhile, a merger between T-Mobile and Orange would definitely be of concern to the government, as the process would send it back to the drawing board to change its primary plans for providing every household in the UK with a reasonably fast broadband service. As a matter of fact, the government’s plan is based on a platform of five operators. A viable resolution to the 900MHz mobile broadband spectrum dispute is anticipated by many at present, more so after the personal intervention of the UK business secretary, Lord Mandelson. It is also understood that he has given T-Mobile, the main objector, a week’s deadline to reach a solution.
