Mobile phone market 'too competitive for small players' in UK

Published on Tuesday 26 January 2010 20:34

T-MOBILE has warned that the UK mobile phone market is too competitive for small players, urging authorities to approve its proposed merger with Orange.

Richard Moat, the managing director of Deutsche Telekom's UK mobile unit, said without change the level of competition would lead to a reduction in choice and competition for consumers.

"In the UK, margin pressures are altering the competitive landscape and altering our ability to fund the future," Moat told a telecommunications conference in London yesterday.

"Without change, the smaller scale network operators – of which Orange and T-Mobile are two – would not be able to compete across the board with the two big operators. We just don't have the necessary scale and scale in mobile telecoms is vital."

In September Deutsche Telekom and France Telecom announced plans to merge their UK units, T-Mobile and Orange.

The 50-50 joint venture would be the UK's largest mobile phone provider with a market share of 37 per cent, ahead of current leader O2, owned by Spain's Telefonica.

The merger will have to be approved by competition regulators, with the impact on consumers the main focus.

It is unclear whether authorities in the UK or Brussels will consider the merger. The Office of Fair Trading said this month that it would ask if it would be "appropriate" to call the merger in for review in the UK, while the European Union is also considering an investigation.

Moat said T-Mobile would prefer the merger be considered at European level.

If it were dealt with in Brussels, "then you could be looking at approval like the end of February," Moat said, but that approval could be delayed until 2011 if it were considered in the UK.

Analysts have said a merger between the two operators could help all operators in the highly competitive British market as it removes one competitor.

But executives at O2 and 3, the mobile provider owned by Hutchison Whampoa, have issued warnings about the merger. Both companies are concerned about the dominant position the merged entity would have over high speed wireless services.

If the deal goes ahead, Moat said the combined entity would be able to invest in acquiring customers, improving the network and delivering better services.

He added: "It is not going to be a dominant force to stifle competition but it will be a dynamic force to stimulate competition and drive efficiency."

T-Mobile saw a turnaround in its fortunes by the end of 2009, but Moat insisted the merger was still vital for long-term success.

"We need to move up to a new level and if we don't do that than the cost is going to be a reduction in competition and a reduction in choice for the customer."