France Telecom and Danish telecoms group TDC said that they have reached an agreement to combine their respective Swiss subsidiaries, Orange Communication and Sunrise Communications. France Telecom said that it will pay a net amount of €1.5 billion to TDC and will become a 75% shareholder in the combined entity while TDC will hold the rest.
With approximately 3.4m mobile and 1.1m fixed and broadband customers, the combined entity is expected to account for around 38% of the mobile telephony market and 13% of the fixed broadband connections, the companies said.
The companies said that this merger is expected to result in better mobile network coverage, broadband capacity and quality for 2G and 3G services, with notable environmental benefits. Joint network development would lead to a reduction of around one third in the projected number of mobile telephone antennas compared to the original network build-up plans.
The Board of the combined entity will be composed of representatives of TDC and France Telecom, with France Telecom holding the majority of the seats. Thomas Sieber will be the CEO of the combined entity while Christoph Brand will continue as Sunrise‘s CEO up until the completion of the transaction.
After closing the merger, France Telecom will fully consolidate the combined entity, whilst TDC will recognise its interest in the company using the equity method. The transaction is expected to create substantial value for both shareholders and for France Telecom to be accretive from 2010 in terms of free cash-flow per share and from 2011 in terms of earnings per share.
Gervais Pellissier, deputy CEO and CFO of France Telecom, said: “The planned merger of Sunrise and Orange Switzerland marks a new significant step in the long-term investment by France Telecom-Orange in Switzerland. Following the UK joint venture between Orange and T-Mobile, France Telecom completes another major in-market consolidation, consistent with its M&A policy.”