France Telecom SA–Orange PLC Merger

In February 2000, Vodafone acquired Mannesmann for approximately US $ 183 billion. On May 30, 2000, France Telecom SA and London-based mobile phone operator Orange PLC announced their US$ 40.2 billion merger to become Europe’s second largest wireless telecommunications company. Orange was merged with France Telecom’s existing mobile operations which included Itineris. The company continued its operation under the brand name “Orange.” France Telecom evinced interest in Orange acquisition after the British operator won one of the five 3G mobile phone licenses in Britain which allowed mobile phone companies to offer services such as high speed, always on Internet, quality video, and television. Under the terms of deal, France Telecom paid Vodafone AirTouch PLC 25.1 billion pounds in a mixture of cash and shares. France Telecom also took on 1.8 billion pounds in Orange debt. The deal made France Telecom the second largest mobile phone company in Europe after Vodafone with operations in Britain, France, Belgium, Portugal, Germany, Italy, and Eastern Europe. The cumulative returns for the Orange stock for the 6-day period surrounding the merger announcement (−2 day to +3 day through zero being the announcement) was approximately 32%. The cumulative returns for Orange were analyzed for 250-day period surrounding the merger window (−5 to +245 day). The stock deteriorated in stock market performance after the merger announcement in the longer period.