The merged venture would have a combined mobile customer base of around 28.4 million, representing approximately 37% of UK mobile subscribers.
The talks come after speculation that T-Mobile would be bought by a rival, thought to be Vodafone or O2.
The companies said the deal would lead to a higher proportion of sales through their own shops, resulting in lower distribution costs; a reduction in the combined number of
stores and savings in marketing costs on the roll-out of a new branding strategy.
The T-Mobile UK and Orange UK brands will be maintained separately for 18 months after completion of the transaction before they develop a new branding strategy.
The management team would be led by Tom Alexander, currently CEO of Orange UK, as CEO and Richard Moat, currently CEO of T-Mobile UK, as COO.
The business will have combined revenues of £7.7bn.
The companies said the deal will result in expanded network coverage, better customer proximity through a larger network of own shops and improved customer services, and better broadband services.
The merger and integration of T-Mobile UK with Orange UK should generate estimated synergies with a net present value in excess of £3.5 bn.
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