Mobile - Orange and T-Mobile merger finds favour in Brussels

[the guardian] The merger of Orange and T-Mobile looks set to get the go-ahead from the European commission after a last-minute deal was thrashed out over the weekend to secure the future of 3, the UK's smallest mobile phone network.

The merged business would be the UK's largest mobile phone company, with almost 30 million customers, and Orange and T-Mobile have agreed to hand back some of the mobile phone spectrum it would own in order to allow this to be used by rivals to run super-fast wireless broadband services.

The commission has yet to inform the Office of Fair Trading (OFT) about its decision, and the merger could still face a challenge from Vodafone and O2, which are understood to be "lukewarm" about the concessions made over spectrum.

The commission's decision is a blow to consumer groups that had been campaigning for authorities in the UK to investigate the deal.

This month the OFT formally requested jurisdiction to investigate the merger from the commission, which had until 1 March to give a decision. The OFT will tomorrow publish the reasons why it had asked to be allowed to run its own investigation, although the commission now believes it has dealt with any concerns. It was the OFT's request that spurred Orange and T-Mobile into action.

Fears that the merger, announced last September, would become clogged up in the UK's lengthy competition procedure led both companies to come up with a solution that met the concerns of the commission about the deal. The OFT and Ofcom, the telecoms regulator, were extensively consulted by the commission during the process.

The main concern was about the merger's effect on the future of 3, which has driven price competition in recent years. However, over the weekend, 3, which is owned by the Hong Kong conglomerate Hutchison Whampoa, signed a new deal with T-Mobile and Orange, which will give it access to 3,000 more mast sites across the UK over the next few years, bringing the total to 16,000, the largest 3G network in the country.

Second, the UK authorities and Brussels were concerned about the level of control that the merged company would have over the scarce resource that is wireless spectrum. Specifically the merged group would have the vast majority of the spectrum granted in the 1990s, when Orange and One2One were launched, at 1800MHz. As reported by the Observer a week ago, T-Mobile and Orange have agreed to hand back a quarter of the spectrum the merged group would hold.

Neither 3, Orange, T-Mobile, Vodafone, O2 nor the OFT would comment.

The OFT will tomorrow give its reasons for asking the commission whether it could have jurisdiction over the case, in a stock exchange announcement.

A copy of its reasoning, seen by the Guardian, makes it clear that the OFT's main concern about any deal was also the future of 3. "The OFT considers that any weakening/elimination of Hutchison 3G would effectively result in a reduction of vertically integrated competitors from five to three and cause significant detriment to competition in mobile retail telephony," the document reads.

Orange and T-Mobile merger finds favour in Brussels