February 17, 2010 / 4:03 PM / 10 years ago

MOBILE FAIR-UPDATE 1-Orange, T-Mobile make spectrum offer-source

* Have offered to give up some 1800 spectrum-sources

* Offering to support smaller operator 3

* Orange chief says won’t remove either brand in merger

(Adds regulatory offer)

By Kate Holton

BARCELONA, Feb 17 (Reuters) - France Telecom’s Orange FTE.PA and Deutsche Telekom’s (DTEGn.DE) T-Mobile have offered to release some radio spectrum in the UK and provide concessions to smaller local operator 3 in a bid to get their UK merger deal approved, two people familiar with the situation said.

Orange and T-Mobile agreed in November to form a 50-50 joint venture in the UK that would give them a leading market share of about 37 percent while reducing the number of mobile phone operators in the country to four from five. [ID:nL5241342].

The two firms are currently waiting to hear whether the deal will be examined by regulators in London or Brussels and both have made it clear they believe an examination by European regulators would be faster and therefore preferable.

A person familiar with the situation told Reuters a questionnaire had been sent from the Commission to the other large UK mobile operators, including Telefonica’s (TEF.MC) O2, Vodafone (VOD.L), and Hutchison’s 3 0013.HK, and fixed-line firm BT (BT.L).

3 is the smallest mobile operator in the UK and it has a network sharing deal with T-Mobile. It could be offered some concessions as part of that deal.

Vodafone has said previously it supports the merger but it thinks regulators should look at how much spectrum, and particularly in the 1800 megahertz band, the combined entity would have.

The two companies are keen to have the deal approved as soon as possible but analysts believe the other operators would like to see Orange and T-Mobile distracted by the deal for as long as possible and therefore less able to compete.

“The issue will be how much and at what timeframe they are offering to give up (of) the spectrum,” the source said.

Both Orange and T-Mobile declined to comment on any offer but said they continue to talk to all the regulators.

Olaf Swantee, the global head of the Orange mobile business, told Reuters earlier on Wednesday the combined company would continue to run both mobile brands in the UK for the foreseeable future.

Analysts had speculated that one brand, most likely T-Mobile, would be wound down in the UK as part of the drive to take out costs.

“It doesnt make any sense (to remove the Orange brand) but it also doesn’t make any sense to drop the T-Mobile brand frankly,” Swantee told Reuters at the annual Mobile World Congress trade fair in Barcelona. “We’re quite convinced that the key for this merger is to provide benefits for a T-Mobile customer and Orange customer on day one. So the last thing we’re going to do is kill a brand or rip one out of the market.

Swantee said the combined entity would be focussed on providing a range of communication services and would particularly look to develop its offering to business customers. (Editing by Greg Mahlich)

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