Orange/T-Mobile merger challenged

Media regulator Ofcom says deal might hurt consumers

The proposed merger of the British operations of telecoms carriers Orange and T-Mobile might curb competition in ways that hurt consumers, regulator Ofcom said.

In a report on the state of the mobile market, Ofcom said it was satisfied that consumers were well served thanks to competition between the country's five mobile carriers, but this situation could change if the merger went ahead.

"The proposed merger between T-Mobile and Orange may well have significant implications for the conclusions set out in this document and for our future work programme," it said.

Ofcom has no direct authority to approve mergers -- which are regulated by the Office of Fair Trading unless they meet criteria to be assessed by the EU -- but it said it expected to provide input to the relevant authorities.

Ofcom said this matter fell under the European Commission's jurisdiction and the parties had signalled their intention to file a submission with the EC, which might refer it back to Britain's competition authorities.

The Commission said it had not yet received any such submission from Orange and T-Mobile, who signed an agreement last month to form a 50-50 joint venture that would grab the top spot in Britain with a market share of 37%.

Ofcom said most stakeholders who had provided input for its report had agreed with it that a full market review was not currently required, although some had said this might need to be reconsidered if the market structure changed.

"We agree that this is an important qualification and our current view, that a market review is not needed, might change if one or more competitors left the market, particularly at the network level," it said.

Ofcom also noted, however, that Orange and T-Mobile had mentioned improved coverage and network quality as potential benefits of the merger to consumers. It said it was concerned about the availability and quality of network coverage.
For a merger to be assessed by the EU rather than national authorities, the combined worldwide turnover of the companies must be more than half a billion euros and neither may make more than two-thirds of its EU sales in a single EU country.

T-Mobile's parent Deutsche Telekom made revenue of €61.7 billion ($88.8 billion) in 2008, while Orange's owner France Telecom made revenue of €53.5 billion ($77 billion). Both have significant operations in several EU countries.