September 11, 2009 by Jenny Sanderson
In a move that has had financial professionals rubbing their hands with glee (for the first time in a while), Orange and T-Mobile have announced plans to merge, creating the biggest mobile phone company in the UK, with approximately 40% market share. The move is thought to have been prompted by increasingly hostile market conditions and mounting difficulties when it comes to turning a profit from customers.
The move will lead to a huge reduction in costs for both companies as they take advantage of enhanced economies of scale. It will also, in all likelihood, lead to sweeping job cuts across the industry, with call centres and branch jobs likely to be hardest hit. It is thought by industry analysts that prices at the customer level will fall in the short term, though many consumer advocacy groups are worried that the reduced competition will lead to customer service issues in the long term.
Even though both parties seem 100% committed to the move, it could still be scuppered by the regulators, who usually don’t like to allow any company to acquire more than a 25% stake in an industry.
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