Vodafone UK considering T-Mobile UK Takeover

In a move that would forge the largest mobile phone operator in Great Britain, Vodafone’s UK branch (VOD.L : 149.80 : +0.75) are looking at potentially buying the UK branch of T-Mobile, the Times Online is reporting.

T-Mobile UK has been placed on the market by Deutsche Telekom, it’s owner, who have appointed J.P. Morgan to advise it on its options. Compared to other operators in Great Britain, T-Mobile is a comparatively small player valued between £2.5 billion and £3.4 billion. It commands a market share of just 15% compared to Vodafone’s 25%. Deutsche Telekom is thought to want out of the fiercely competitive and low-margin British market which, with five big companies, is more congested than most in Europe.

A joint venture or an outright acquisition are among the options on the table however regulators will have to approve any deal. As well as being bound by the competition rules, the industry is regulated by Ofcom, which is investigating charges that operators levy customers for connecting to other networks.

Some analysts believe that consolidation is more likely for Vodafone, as they have previously stated they are constantly vigilant of opportunities of this sort, and Vodafone Australia has recently merged with Hutchison Whampoa.

Vittorio Colao, who became chief executive last July, said that he was an “active supporter” of consolidation with T-Mobile, the No 4 in Britain, and Hutchison 3G, the fifth-largest operator. Mr Colao said last month: “I don’t know if there is a three-way [merger], I don’t know if there is a two-way, I don’t know if there is a way at all — but it is clear to me that there are a few markets around the world where consolidation would make sense and we are one of the leading players, so we have a duty to look at everything. If things make sense and improves the conditions in the market, we will try our best.”

Vodafone announced a fresh wave of costcutting last month after nearly £6 billion of writedowns halved its full-year profits to £3.08 billion. It is the world’s largest operator, by revenue. It wrote down the value of its Spanish business by £3.4 billion and took a £500 million hit on its Turkish division as the global downturn and increasingly tough competition took their toll.

T-Mobile and Vodafone declined to comment last night, however one source said that Vodafone was examining its options.