Orange and T-Mobile tie-up to face OFT scrutiny?

For Orange and T-Mobile, an investigation by the Office of Fair Trading has serious headache potential.

Last Updated: 31 Aug 2010

Bad news for Orange and T-Mobile: the UK’s Office of Fair Trading has apparently asked the European Commission if it can scrutinise their proposed merger. The OFT’s argument – that the deal will hurt competition in the UK telecoms market – is not an unreasonable one (although some will argue that further consolidation in the mobile phone market is inevitable). But it could still spell trouble for the two mobile giants: a UK investigation might mean a more stringent approach, and possibly tougher conditions attached to the deal. And if nothing else, it’s likely to be a lot slower than the Brussels equivalent.

The competition authorities were always going to have their say on the proposed Orange/ T-Mobile deal, but the two firms have been lobbying hard for the scrutiny to come from Brussels, which tends to be ‘lighter-touch’, shall we say. However, after the OFT was forced to drop its investigations into bank charges back in December, it’s spoiling for a fresh challenge, and this proposed tie-up is just the ticket. Apparently it’s now requesting that the deal should be investigated in the UK too. This is as a blow to the two mobile giants, who were hoping to have the deal rubber-stamped by mid-February. If the OFT sticks its oar in, the process could take months (especially if the Competition Commission gets involved too). Bummer.

The OFT has a point, in some ways. The merger would reduce the number of mobile phone operators in the UK from five to four, leaving the newly formed Orange/T-Mobile powerhouse with a combined customer base of 29.5m – more than either of the current market leaders, O2 and Vodafone. There are also concerns about the effect the deal would have on 3, the UK’s smallest mobile phone provider, which currently has a network sharing deal with T-Mobile (after a merger, it probably won’t need that). On the other hand, consolidation of the mobile market has been on the cards for a while. People have probably bought as many mobile phones as they’re going to buy, so now it’s just down to economies of scale. That means the bigger organisations are going to clean up.

Still, at least there’s one group of people who’ll welcome the OFT getting involved: competition lawyers will presumably in for a good old-fashioned fee bonanza. Ch-ching!

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