Analysis of Deutsche Telekom AG and France Telecom SA Joint Venture

Orange S.A., a subsidiary of France Télécom, is a multinational telecommunications firm with over 170,000 employees, serves more than 230 million customers worldwide, and has revenue of 44 billion Euros as of 2013 (Orange 2014). T-Mobile, a German telecommunications subsidiary of Deutsche Telekom AG, has over 240 million customers worldwide and is tenth largest mobile phone company in the world (Telekom 2014).
On September 8, 2009, Deutsche Telekom AG and France Telecom SA announced their plan to pursue a joint venture with their T-Mobile and Orange subsidiaries. Orange UK and T-Mobile UK became largest communications company in the UK, under the umbrella brand, Everything Everywhere, officially on July 1, 2010 (Orange 2014).
2. What was the benefit that both companies expected from the merger?
The benefit of the merger between T-Mobile and Orange was to become the biggest mobile network provider in the UK with 28 million customers and 37% of the market, leapfrogging rivals O2 and Vodafone. This JV offered Deutsche Telekom a solution to its problems in the UK, where T- Mobile was in fourth place and had been underperforming compared to its rivals. It also allowed Orange to improve its margins by sharing its wireless assets with T-Mobile .
In this industry, companies need to provide a national network, meaning that there are significant economies of scale to be made with a merger. For example, when T-Mobile and Orange decided to merge, their ambition was to combine both networks, eliminate duplication and create a single super-network. Furthermore, they said it would provide the customers with a bigger network and better coverage .
3. Describe the relevant products/services and markets, which may be affected by this concentratio...

... middle of paper ...

...ubmitted a revised set of commitments, including the recommendations of OFT (Office of Fair Trading) and OFCOM (Federal Office of Communication). The first set of commitments was not concise to the competitors’ concerns, specifically related to spectrum purchasing decisions. On February 25th, a second set of commitment was established and the conditions were related to:
(i) 3UK's position on the market
The commission saw the risk that if the merger erodes the 3G RAN sharing agreement, it might remove 3UK as an effective competitor in the UK.
Orange and T-Mobile sign an agreement with 3UK to avoid this problem .
(ii) The concentration of spectrum in the 1800MHz band
According to the 1800MHZ, the Commission concludes that the merger would have a dominant position in that market. T-Mobile and Orange would have to give full radio access network sharing agreement to 3UK.