T-Mobile and Orange joint venture will overtake O2 as the UK’s leading mobile phone operator.

After much speculation, Deutsche Telekom and France Telecom have jointly announced that they plan to combine T-Mobile UK and Orange UK to create the UK’s biggest mobile phone operator.

T-Mobile has recently been the subject of media reports about a possible buyout. Earlier this week, the Sunday Times reported that rival mobile operators Vodafone and O2 had both tabled bids of around £3.5 billion to acquire T-Mobile UK. However, Spain Telefonica, which owns the UK’s two biggest operators, declined to comment on the report.

T-Mobile is currently the fourth-largest mobile phone operator in the UK, behind Orange, Vodafone and O2. The newly combined business will have a customer base of around 28.4 million, representing approximately 37% of UK mobile subscribers.

It is anticipated that the merger will create savings of around £3.5bn over time, though integrating the two companies could cost between £600m - £800m.

Benefits to UK customers will be substantial according to the telecom giants. Consumers will enjoy “expanded network coverage and enhanced indoor and outdoor network quality for 2G and 3G services” as well as an improved customer service experience.

Timotheus Höttges, CFO of Deutsche Telekom, said: “We will become market leader – our customers will benefit in many ways for example from the best mobile broadband offer in Britain. In the second-biggest market in Europe, which is undoubtedly one of the toughest and most competitive, we are giving T-Mobile UK a clear and strong future.”

Gervais Pellissier, CFO of France Telecom, said: “By combining our operations in the UK, we anticipate the long-awaited consolidation in one of Europe’s most competitive markets, thereby creating a well positioned player. This will reinforce fair competition and will provide strong benefits for customers through improved coverage, quality of service and an enhanced capacity to develop new services and technologies.”

According to the statement issued today (8 September) the two brands will remain separate for the 18 months following completion of the merger, and in the meantime a new branding strategy will be developed for shareholder approval.

Contracts are set to be signed by the end of October, subject to shareholder approval and the companies have confirmed that existing CEO’s Tom Alexander and Richard Moat of Orange UK and T-Mobile UK respectively will lead the management team of the new venture.