OFT to fast-track Orange and T-Mobile merger through EU

Author: By Mark Leftly and Greg Walton

Although a final decision has not been taken, the Office of Fair Trading (OFT) is understood to no longer want the tie-up to face a competition inquiry here. T-Mobile, owned by Deutsche Telekom, and Orange, part of the France Telecom empire, finalised the 50:50 joint venture earlier this month.

The European competition commissioner, Neelie Kroes, is expected to receive documents from the companies on the deal before Christmas. These are then placed on the commission’s website and passed to member states, a process known as “notification”.

Typically, the commission would then investigate competition issues ? and recommend any divestments to ensure that the market is not dominated by too few players ? within a period of roughly six months.

But as the deal is centred on the UK market, the OFT has 15 working days from notification to argue that the competition issues should be decided at national rather the EU level.

The British competition process usually takes about six months longer than those held by the commission. One of the reasons for this is that the OFT refers cases on to Britain’s Competition Commission, so involving yet another body.

“This type of investigation is a good deal quicker to undertake in Europe. In the UK, the process is too cumbersome,” said an industry source.

The OFT is not likely to argue a case for the joint-venture competition issues to be pursued in Britain because it has worked closely with Ms Kroes’ team, and so it understands the UK’s concerns. The merger will create Britain’s biggest mobile operator with more than one-third of the market, but the Government is keen for the tie-up to take place quickly as its decision on allocating the next tranche of electro-magnetic spectrum to mobile operators is hoped to be made next year.

This decision could not be made if the merged company’s market share has not been finalised and would probably have to be delayed until 2011. As it stands, the tie-up would be too market dominant.

The deal comes at a potentially turbulent time for the commission. Ms Kroes is expected to leave her post early next year, when new commissioners are chosen. Germany is understood to be lobbying hard to take over her post. Ms Kroes is considered to have performed well during the economic crisis. She has successfully imposed unprecedented fines on Intel and Microsoft and is now scrutinising 28 European banking groups which have received state aid.

The former Dutch minister has faced criticism from state-backed banks including the Royal Bank of Scotland for reports that the commission may force them to sell assets.

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