SIM Only Contract Deals

Orange and T-Mobile who are currently the third and fourth largest mobile phone operators in the UK market and struck a deal to team up in its efforts to beat tough competition from O2 and Vodafone.

Both operators combined will have an estimated of around 30 million customers covering a whopping 37% of the entire UK market.  The move will of course out leap their arch rivals Vodafone and O2 making them making them the biggest mobile phone operator.

The market share after the merger announcement by both mobile network operators is as follows:

T-Mobile and Orange = 37%
O2 = 28%
Vodafone = 23%
Virgin = 6.2%
3 = 5.8%

Total mobile phone subscriptions held are:

T-Mobile and Orange = 28.4 million
O2 = 21.5 million
Vodafone = 17.7 million
Virgin = 4.8 million
3 Mobile = 4.5 million

Date Source: Ofcom (The Communications Market 2008)

Merging of the two mobile network operators is expected to officially take place and be confirmed in November 2009 by outing pen to paper.

The integration although can cost up to £800 million according to both firms, makes sense as a long term strategy and business model.  Costs can be cut in many areas of both mobile firms such as reduction of stores and decommissioning of mobile phone masts.

Integrating the two businesses will cost up to £800 million, according to the firms, but there are substantial savings to be made in the long term thanks to the decommissioning of mobile phone masts and reduction in stores, among other changes.  Although a new brand identity can take as long as up until 2012, marketing and customer service expenditure are also expected to be reduced.

T-Mobile and Orange have claimed that if given the go ahead by both UK and European regulators, the deal will “bring substantial benefits to UK customers”, showing potential for better network quality, expanded network coverage,  and improved customer services.  We expect the deal itself to be given the all-clear as the combined UK market share still falls below 40% and many European countries have an average of four major mobile phone operators and not five.

Although the joint venture deal will bring logical benefits to both T-Mobile and Orange, it is too early to state whether T-Mobile or Orange customers will benefit from this.  It is however safe to assume that due to their market dominance, they will face less competition in order to bring down prices.  The immediate benefit we can see is that mobile contracts including SIM card only deals and Pay As You Go deals is  that offers with inclusive minutes to the same mobile network for T-Mobile will also cover calls to Orange and vice versa for Orange customers due to both networks being one.

It will be interesting to see how the larger two competitors O2 and Vodafone react to this announcement as well as the smaller two Virgin and 3 Mobile.