Big Still Looking Better as Mobile Giants Merge in UK

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Mobile broadband consolidation rocked the UK Tuesday as Deutch Telecom and France Telecom announced plans to consolidate their British operations, according to a report in the New York Times. Pending approval of both companies’ shareholders and European regulators, the combined venture would become the largest mobile carrier in the UK, surpassing current leaders O2 and Vodaphone and commanding 37% of the UK’s mobile subscriber base.

Saturated European mobile markets have seen waves of consolidation in recent years, a trend analysts expect to continue as network operators struggle to secure market share and squeeze profits from shrinking retail operations and trimming administrative costs.

With the number of mobile operators now down to three in both Denmark and the Netherlands, Gartner analyst Katja Ruud targets Spain and Sweden as the next likely venues for consolidation to take hold. “Consolidation in general is never ‘done,’ so to speak, and in markets where there are three or more operators, you can expect this to happen,” she said.

The French carrier, known as Orange in Britain, and the German T-Mobile plan to continue operating under their separate brands for 18 months before deciding on a unified brand, according to the report. The companies said they planned to spend £600 million to £800 million, or $984 million to $1.3 billion, through 2014 to eliminate unneeded mobile base stations, close retail stores and streamline administrative operations. In a conference call, Tom Alexander, chief executive of Orange in Britain, said the merger would lead to layoffs but declined to be more specific.

“For these two networks to merge makes simple business sense,” said Ernest Doku, an analyst with Omio, an online handset retailer in Britain. “They instantly turn from a bit part into a big player.”