VODAFONE PLANS BID FOR T-MOBILE
MOBILE network operator Vodafone is considering launching a daring bid to buy smaller rival T-Mobile UK, in plans that could bring it face-to-face with competition regulators.
The world’s largest mobile network by revenue is kicking the tyres at underperforming T-Mobile UK, which has an estimated enterprise value of around €4bn (£3.4bn).
Such a deal would give rise to a giant combined entity controlling at least 40 per cent of the UK market, dwarfing rivals like O2, currently the biggest UK mobile network by market share, and French-owned Orange.
As well as attracting attention from competition authorities, O2’s Spanish owner Telefónica and Orange’s owner France Telecom would be likely to lead calls for the deal to be vetoed.
Smaller market participants like 3, which controls around 8 per cent of the market, would also be likely to campaign for potentially costly and long-term legal procedures.
However, if Vodafone could guarantee the firm’s market share would not exceed a certain critical point under any merger or joint venture, it might be able to force a deal through.
Currently, single operators have market shares of around 40 per cent in France, Italy and Spain.
René Obermann, chief executive of Deutsche Telekom, which owns T-Mobile UK, has appointed US investment-banking giant JP Morgan to advise it on options for the struggling mobile network.
T-Mobile UK has failed to keep up with some rivals during the recession and in the first quarter of 2009 Deutsche Telekom reported huge write-downs on its UK operations, that swung it to a net loss for the first-quarter.
The Vodafone interest comes after chief executive Vittorio Colao in November outlined plans to lead consolidation across global mobile telephone markets.
He last month won approval from Australian regulators to combine Vodafone’s mobile business there with that of rival Hutchison Whampoa.
Deutsche Telekom was thought to have rejected an offer for T-Mobile UK from Orange owner France Telecom earlier this month. At the time it was reported the group planned to redouble efforts to boost the unit’s profitability.
Vodafone, which is headquartered in Newbury, in May revealed a 15.6 per cent boost in revenues to £41bn during the year to the end of March. Colao has been commended for early cost cutting that has allowed the company to perform relatively strongly.
Vodafone and T-Mobile declined to confirm the plans when contacted by Morning Wire last night. Vodafone shares closed down on Friday at 115.25p.