The as-yet-unnamed joint venture will have a combined customer base of about 28.4 million people, or 37 percent of the market, with the deal expected to complete in November. Orange chief executive Tom Alexander will be chief executive of the new company, with T-Mobile UK chief executive Richard Moat as chief operating officer.
The companies said the merger will cost between £400m ($656m) and £600m ($984m). It is expected to deliver savings of around half-a-billion pounds per year by 2014, by removing duplicate base stations and retail outlets, as well as other efficiencies in operational staff and customer support.
Timotheus Höttges, chief financial officer of T-Mobile UK's parent company Deutsche Telekom, said in a statement: "We will become [the] market leader — our customers will benefit in many ways, for example from the best mobile broadband offer in Britain.
"In the second-biggest market in Europe, which is undoubtedly one of the toughest and most competitive, we are giving T-Mobile UK a clear and strong future."
The deal will include T-Mobile UK's 50 percent holding in its 3G network joint venture with Hutchison. It is not known how or if the deal will affect the status of Virgin Mobile, which runs on T-Mobile's network.
Deutsche Telekom lost €600m (£525m) ($878m) in the first half of 2009, down from €1.3bn profit in the same period last year, with its T-Mobile UK division writing off €1.8bn ($2.58bn) and losing 100,000 customers. The period saw gains in the German company's other European mobile operations.
Orange said its UK first half sales were down 2.6 percent from last year, at €2.54bn ($3.64bn).
The deal will need shareholder approval from both companies and will also have to be cleared by British and European regulators. The UK mobile telecommunications market is widely regarded as highly competitive, and no regulatory problems are anticipated.
This article was originally posted on ZDNet UK.