France Telecom is merging its Swiss operations, Orange, with Danish carrier TDC’s Swedish mobile arm Sunrise to create a united force against incumbent Swisscom.
The deal follows the consolidation trend set by the mega merger currently underway in the UK between France Telecom and Deutshe Telekom’s UK assets.
Under the Swiss arrangement, France Telecom will hold a 75% stake in the new venture, tipping in €1.5 billion, while TDC will hold 25%.
The new merged company will have over 3.4 million mobile users, giving it a 38% market share, while in fixed line it will have 1.1 million customers equaling 13% of fixed broadband connections.
France Telecom’s deputy chief executive Gervais Pellissier said that the merged company would have had pro forma sales of €2 billion last year.
For TDC, the deal allows the carrier to focus on the Nordic markets, which has been its stated strategic goal.
To facilitate its ultimate exit, TDC’s remaining 25% stake may be bought back by the merged company using cash flow from a buyback programme by the first quarter of 2014, giving the entire stake a net present value of €1.2 billion.
The merged carrier which has yet to be named will be led by the current CEO of Orange Switzerland Thomas Sieber. Sunrise CEO Christoph Brand will leave after the initial integration.