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Mobile phone merger is bad news

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 08 September 2009  |  Comments 3 comments

I fear the proposed merger between T Mobile and Orange will lead to higher charges.

So we learned today that T-Mobile and Orange are planning to merge in the UK, and create the country's largest mobile phone operator. I don't see this as good news for the likes of you and me.

It's true that the newly merged operator will be able to cut costs and some of those savings might be passed onto consumers.

But there's a downside too.

The problem is that there will be only three major players left after this merger. Orange/T-Mobile will have 37% of the market, Vodafone 24%, and O2 will have 22%. The remaining market share is held by 3 and some other players who don't have their own infrastructure.

I worry that the merger will mean there won't be enough competition in the mobile market and we could end up seeing price rises. That's in spite of the fact that Orange/T-Mobile will be able to reduce its cost base. It'll be interesting to see whether the regulators will allow this deal to go through. I hope they're tough and say 'no.'

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Comments (3)

  • Ed Bowsher
    Love rating 76
    Ed Bowsher said

    Hi Rightoncommander,

    Yes, your point about Lloyds/HBOS is a good one. An indication of what might happen. I wish I'd thought to say that in my original post.

    It seems like this telecom merger will be waved through. It'll be interesting to see if we are at the beginning of a mini M&A boom. Could well be.

    Ed

    Report on 08 September 2009  |  Love thisLove  0 loves
  • gordonbanks42
    Love rating 11
    gordonbanks42 said

    The EU position on the Lloyds/HBOS deal has been mainly sceptical verging on hostile. If that continued, HMG might eventually be forced to roll back that deal, at least in part. HMG probably doesn't want to do that any time soon, so any way to make the EU less keen to roll the deal back would appeal.

    I assume that the merged entity (if the merger is permitted) would be jointly French/German owned, at the outset at least. They will benefit from the increased market power and their respective governments will (as if by magic) become less keen to destroy the precedent (the Lloyds/HBOS deal) which allowed it to happen.

    So HMG acquires two powerful allies in retaining the status quo in the UK banking industry.

    How does that fly for a theory?

    Report on 09 September 2009  |  Love thisLove  0 loves

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