T-Mobile Netherlands announced a deal to merge with Tele2’s Dutch business in a move designed to create a stronger third player and increase competition with current leaders KPN and VodafoneZiggo.
In a statement, T-Mobile’s parent Deutsche Telekom said it would acquire Tele2’s Dutch arm for €190 million in cash, taking a 75 per cent majority ownership in the combined company. Tele2 will retain the remaining 25 per cent.
The deal was positioned as a disruptive play, with T-Mobile looking to “compete more effectively with the KPN and VodafoneZiggo duopoly due to enhanced scale, combined spectrum resources and significant synergy potential”.
Indeed, the combined entity expects synergy potential with an estimated net value in excess of €1 billion, which allows for disruptive customer propositions.
Deutsche Telekom added the merger was part of a long term vision for it to create a sustainable operation in the Netherlands to “disrupt the Dutch telco industry in favour of the customer”.
The German-headquartered operator was mulling an exit from the Netherlands in 2015, but a potential sale to Liberty Global fell through after the latter dropped its interests and subsequently merged its Ziggo cable arm with Vodafone.
Vodafone and Ziggo completed the deal at the start of this year, stepping up the competition with long-term market leader and incumbent KPN. Vodafone was forced to sell its fixed assets to T-Mobile as a condition of the tie-up, lessening the liklihood of Deutsche Telekom exiting the market as it was no longer a mobile only business.
Deutsche Telekom’s CEO Timotheus Hoettges hinted at a deal with Tele2 in November, as the company considered options for its Dutch unit to compete better with the two market leaders.
GSMA Intelligence estimates for Q3 placed the number of KPN connections at 7.9 million, VodafoneZiggo 5 million and T-Mobile 3.6 million. Tele2 is the smallest with 1.2 million connections.
In the statement, T-Mobile CEO Soren Abildgaard said the tie-up “means justice for customers”.
“This duo has been getting away with this game for far too long and there was only one victim, namely the customer,” he said: “No more. No longer. We will be able to compete against the duopoly much more efficiently and give all Dutch customers a fair choice.”
The deal is expected to close in the second half of 2018, subject to approval by competition authorities.