The European Commission has cleared the proposed merger of Orange UK and T-Mobile UK, respectively France Télécom's (FT) and Deutsche Telekom's (DT) UK subsidiaries. The decision is conditional upon the amendment of an existing network sharing agreement with Hutchison 3G UK (3UK), to ensure that there remain sufficient competitors in the market, and the divestiture of a quarter of the combined spectrum of the merging parties in the 1800 MHz band, which is one of three frequency bands currently used for mobile communications in the UK.

The business activities of the undertakings concerned are:

• France Télécom (EPA:FTE): provision of integrated telecommunications and information technology services.
• Deutsche Telekom (NYSE:DT): provision of integrated telecommunications and information technology services.
• Orange UK: provision of mobile telephony services in UK.
• T-Mobile UK: provision of mobile telephony services in UK.

The transaction was notified to the Commission for regulatory clearance under the EU Merger Regulation on 11 January 2010.

In the course of the investigation, the Commission identified no direct concerns in relation to the market for the provision of mobile telecommunications services to end-consumers, the wholesale market for access and call origination on public mobile telephone and the wholesale market for international roaming and related markets.

However, the Commission investigation showed that the transaction, as initially notified, could put at risk the future of T-Mobile's Radio Access Network sharing agreement with 3UK (the Radio Access Network being one of the main infrastructure elements of a mobile network), which is the smallest mobile network operator (MNO) in the UK, owned by Hutchison Whampoa. This could threaten 3UK's viability on the market and possibly eliminate a competitor. With the merger of the subsidiaries of FT and DT there will be only four players in the UK, hence the concerns about the fate of 3UK.

Second, the investigation also revealed that the combined amount of contiguous spectrum held by the parties at the 1800 MHz level (60 MHz) would be significantly larger than that of their competitors. This could result in the new entity being the only MNO in the UK able to offer next-generation mobile data services through Long Term Evolution (LTE) technology at the best possible speeds within the medium term.

In order to address the competition concerns identified by the Commission, the parties concluded a revised agreement with 3UK which will secure its position as a competitive force on the market, and offered to divest 15 MHz of spectrum at the 1800 MHz level. The Commission concluded that the commitments offered by the parties remedy the identified competition concerns.

The Commission cooperated closely with both the OFT and the UK's telecommunications regulator OFCOM throughout the investigation. In light of the commitments offered by the parties, the OFT withdrew its referral request on 1 March 2010.

More information on the case will be available at DG Competition of the European Commission website.