In the early 2010s the mobile phone company Orange merged with another mobile Network firm, T Mobile, in order to a form a new company called EE. Explain what type of merger this is and discuss some of the possible costs and benefits of this merger.

The merger between T mobile and Orange was a Horizontal one. This means that the firms that merged are in the same industry and were both operating on the same stage of the production process( in this case both firms sold phones and set up phone contracts for people). There are several benefits to this- firstly the combined firm now has a larger market share than they did before- meaning they have more power to control prices than they did before. This could allow them to raise prices to make supernormal profits, or they could lower prices for consumers. It also means that the firm can generate economies of scale, which are benefits the firm receives for growing in size leading to lower average costs. For instance EE might be able to buy phones in bulk for cheaper, because they are buying more phones. There are also less firms in the market- meaning there is less pressure for EE to have to come up with more innovative ways to out-compete other firms. This also saves the firm some money. The firm could also rationalise its resources by cutting down on things such as transport and the amount of people doing the same job.There are several disadvantages to this however- firstly the consumer might lose out, this is due to the lack of innovation due to a lack of competition as mentioned above. Furthermore the increased market share might lead to higher prices for consumers. Furthermore many workers could be fired as there are now two people who are doing the same job for instance if there is no need for an orange store and t mobile store on the same street, so one is likely to be shut down. Dis-economies of scale are also an issue- this is when a firm becomes so large that average costs start to rise due to factors such as miscommunication between different parts of the company.