T-Mobile and Orange Complete UK Merger Tweet

Deutsche Telekom and France Telecom have announced the successful completion of the merger of their UK mobile networks and the formation of the new Joint Venture. The JV will be accounted for using the equity method as of April 2010 for both Deutsche Telekom and France Telecom.

Tom Alexander, former CEO of Orange UK, is the Chief Executive of the new Joint Venture, and Richard Moat, the former CEO of T-Mobile UK, is Chief Financial Officer and Deputy CEO. A Board of Directors has also been formed, on which Tom Alexander and Richard Moat will serve as executive directors. Tim Höttges, CFO of Deutsche Telekom, will lead the board as non-executive chairman for two years. After this time, the leadership will rotate to Gervais Pellissier, Deputy CEO and CFO of France Telecom, for two years.

Also joining the six-person Board as non-executive directors are Philipp Humm, Chief Regional Officer Europe for Deutsche Telekom and Olaf Swantee, Executive Vice President Europe at France Telecom.

The merged venture is expected to lead to operational cost savings of £445 million (US$730 million) per year from 2014 onwards. These savings will be dependent on up to £800 million (US$1.3 billion) in integration costs over the period from 2010 to 2014. Those costs would primarily relate to the decommissioning of mobile sites, the rationalisation of the network of retail stores and the streamlining of operations.

On the CAPEX side, large scale savings are expected over the first five years following completion of the transaction, resulting from the integration and unification of the networks and from jointly expanding 3G coverage. The potential for capital expenditure savings, net of integration capex, is estimated at £620 million (US$1 billion) on a cumulative basis over 2010-2014, prior to stabilising at approximately £100 million a year from 2015 onwards.

To create the new joint venture, Deutsche Telekom is contributing T-Mobile UK on a cash-free, debt-free basis, including T-Mobile UK's 50 percent holding in its 3G network joint venture with Hutchison and gross tax losses carried forward of at least £1.5 billion. France Telecom is contributing the whole of Orange UK including £1.25 billion of intra-group net debt in order to equalize the value of the contributions to the joint venture.

Deutsche Telekom is to also grant a £625 million shareholder loan to the joint venture, which will be used to simultaneously reimburse £625 million to France Telecom. As a result, the joint venture would have indebtedness of £1.25 billion, represented by two shareholder loans of £625 million held by each of Deutsche Telekom and France Telecom.

source

Labels: