Bigger is better for Orange and T-Mobile
September 9, 2009
The announcement that Orange and T-Mobile U.K. are to merge to create a U.K. mobile telephone giant may just be the start of a trend in which larger and better known companies will merge in an attempt the battle the hard hit economy and the reduction in consumer spending.
Fund manager at Aramea Asset Management, Boris Boehm points out that if a company is not holding onto first or second place within a market, then it may be time to look at getting out. The other option is to look for another company to team up with in order to engulf that market through sheer size.
In Italy there has been some interest from Wind Telecomunicazioni SpA in joining forces with Hutchison Whampoa Ltd’s 3 Italia. The companies are currently the third and fourth largest telecommunication companies in the country.
The T-Mobile Orange merger will make the company the largest in the U.K. with 37 percent of the market share. The mobile market throughout Europe has been feeling the effects of the recession and competition has meant a slash in prices and a subsequent slash in profits. Researchers IDC have forecast that the mobile phone market in Europe currently worth $203 billion will shrink to $199 billion by 2013.
Research in Germany has already shown that revenue per user is slipping. For Deutsche Telekom the figures fell by 6.2 percent and for Vodafone Germany the figures dropped by 8.5 percent.
However telecom companies throughout Europe have said that they will watch what happens in the U.K. before teaming up with each other to produce similar telecom leviathans.
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