Deutsche Telekom, Orange To Form Procurement JV, Target EUR1.3B Savings

04.18.2011 By Gavrila Oana

Telecom operators Deutsche Telekom and Orange have reached a preliminary, non-binding agreement to combine their procurement operations in a 50/50 joint venture that will be set up in the fourth quarter of 2011, targeting EUR1.3 billion in combined savings.

Telecom operators Deutsche Telekom and Orange have reached a preliminary, non-binding agreement to combine their procurement operations in a 50/50 joint venture that will be set up in the fourth quarter of 2011, targeting EUR1.3 billion in combined savings.

The two companies have agreed to combine their procurement activities of customer equipment, network equipment, service platforms and - starting with four pilot-projects - IT-Infrastructure in a 50/50 joint venture, they said in a pres release Monday.

The non-binding Term Sheet signed Monday will be the basis for final contracts yet to be negotiated, the two operators said.

Deutsche Telekom and Orange target EUR1.3 billion combined savings of annual run-rate after three years of implementation for both groups due to technology harmonization and economies of scale.

For Deutsche Telekom and France Telecom-Orange the run-rate after three years of implementation in potential global savings is estimated at above EUR400 million and below EUR900 million.

The jointly owned and operated entity will have two operational units in Bonn and Paris, and will provide measurable value in terms of experience and economies of scale for the benefit of both groups and their respective customers, the press release reads.

The final agreement is expected to be signed in the coming weeks and will require antitrust clearance.

Deutsche Telekom and France Telecom-Orange said in February they were seeking cooperation areas to lower costs in Europe. The two operators merged their UK operations in 2009.

Orange is the leading telecom operator in Romania by number of clients, while Deutsche Telekom is the majority shareholder of Greece's OTE, which owns Romanian Romtelecom, Cosmote and retailer Germanos.