Deutsche Telekom, France Telecom in UK mobile deal

BERLIN: Deutsche Telekom and France Telecom plan to merge their British cell phone units to form what would be the country's biggest mobile operator, the German company announced on Tuesday.

Deutsche Telekom said the two companies have entered exclusive negotiations on combining Deutsche Telekom's T-Mobile UK with France Telecom's Orange UK into a 50-50 joint venture.

It said the new company would have a customer base of some 28.4 mobile phone users, or about 37 percent of U.K. mobile subscribers based on December 2008 figures. The proposed deal ``is expected to create substantial value for both shareholders,'' Deutsche Telekom said in a statement.

Signing of a deal is expected at the end of October, and its completion would be subject to approval by antitrust authorities, it added.

The Bonn-based company said plans call for Deutsche Telekom to contribute T-Mobile UK to the merged firm ``on a cash-free, debt-free basis,'' including the British unit's 50 percent holding in a 3G network joint venture with Hutchison and gross tax losses carried forward of at least 1.5 billion pounds ($2.46 billion).

France Telecom would contribute Orange UK, including 1.25 billion pounds of intra-group net debt, ``in order to equalize the value of the contributions to the joint venture,'' the statement said.

Once the deal closes, Deutsche Telekom would grant a 625 million-pound shareholder loan to the joint venture, which it said would be used to reimburse 625 million pounds to France Telecom.

The joint venture would have total debt of 1.25 billion pounds, represented by shareholder loans of 625 million pounds each held by Deutsche Telekom and France Telecom, the statement said.