UK won’t veto Orange and T-Mobile tie-up, says analyst

A France Telecom’s Orange and Deutsche Telekom's T-Mobile is unlikely to be vetoed by the UK’s Competition Commission, according to JPMorgan analysts.

Deutsche Telekom is under pressure from its shareholders to make a decision on the future of its troubled UK operation. The company recently issued a profit warning caused largely by T-Mobile’s poor performance in what it describes as a ?viciously competitive? market. Deutsche is expected to write down T-Mobile to the tune of EUR1.8bn (USD2.4bn) next week.

JP Morgan analysts tell the Financial Times that France Telecom might buy T-Mobile, which is worth around GBP3.2bn (USD4.8bn), and merge it with its UK arm, Orange. The analysts say the Competition Commission is unlikely to block such a deal even though it would concentrate 40% of the UK mobile market in the hands of one operator.

Deutsche Telekom CEO Ren?bermann says he feels ?the UK market is competitive, and consolidation would do good for that market.?

The UK is unusual among large European mobile markets in hosting five operators. Consolidation would reduce the pressure for aggressive price wars, which lead to poor profit margins.