France Telecom and Danish carrier TDC said Wednesday they have agreed to combine their Swiss operations – Orange and Sunrise – creating a new entity with fixed and mobile service offerings.

Under the deal, the French incumbent will pay €1.5bn to TDC and will become a 75 per cent shareholder in the combined entity, while TDC will hold the remaining 25 per cent.

With approximately 3.4 million mobile and 1.1 million fixed and broadband customers, the combined entity will account for around 38 per cent of the mobile telephony market and 13 per cent of the fixed market.

The merger is expected to generate synergies of €2.1bn, with estimated Opex reductions from network and IT, distribution, marketing and workforce optimisation, expected to reach an annual run-rate of €132m, with cumulative integration costs estimated at €92m. Capex synergies of €376m are expected between 2010 and 2015 with run-rate Capex savings of €43m per year from 2015.

TDC will have the right to sell its stake to third parties from the second year or launch an IPO from the third year. In connection with the exit routes France Telecom will pay €100m per year to TDC in each of 2012, 2013 and 2014.

Gervais Pellissier, France Telecom deputy CEO and CFO, said: “Following the UK joint venture between Orange and T-Mobile, France Telecom completes another major in-market consolidation, consistent with its M&A policy.”