Telefónica tests line for T-Mobile UK bid

The prospect of a bidding war for T-Mobile UK was looming on Wednesday night after it emerged that Telefónica is looking at the case for buying Britain’s fourth largest mobile phone operator, said the Financial Times.

Spain’s leading telecoms company has been spurred into action partly by the possibility that O2, its UK mobile business, could lose its top position in the British market if Vodafone purchases T-Mobile UK.

Separately, it emerged that France Telecom is considering the merits of forming a joint venture between Orange, its UK mobile business, and T-Mobile UK.

Deutsche Telekom is considering selling T-Mobile UK, which analysts value at Euro 3 billion to Euro 4 billion (£3.45 billion), following several years of under performance.

O2 is the largest mobile operator with a 27% share of revenue paid by British mobile phone users.

Vodafone is the second largest operator, on 25%, but the Financial Times revealed on Monday that the company is considering bidding for T-Mobile UK. If the deal went through, Vodafone would secure a market share of 40%.

Telefónica declined to comment, but people familiar with the situation said the Spanish company was considering the case for bidding for T-Mobile UK. The people added that Telefónica had made no decision on whether to make an offer, and stressed its preparatory work was at an early stage.

The risk for Telefónica is that if Vodafone purchases T-Mobile UK, the British company would secure lasting market leadership in Britain.
O2 overtook Vodafone as the UK’s largest mobile operator by customer number in 2006, according to Enders Analysis. O2 has strengthened its position partly by signing a deal with Apple, the US technology company, to be the exclusive British network for the iPhone handset.

Analysts and lawyers say that regulators would likely scrutinise any deal involving T-Mobile UK that gave the new owner a market share of 40% plus.

But they say the regulators could approve a deal, given the leading mobile operators in France, Italy and Spain each have a market share of 40% or more.

France Telecom has denied having any intention of bidding for T-Mobile UK, but people close to the situation said France’s leading telecoms company was considering a joint venture.

Under the arrangement, the assets of Orange and T-Mobile UK could be put into a partnership, and France Telecom might avoid making any payment to Deutsche Telekom.

The joint venture would have market leadership. Orange is Britain’s third largest mobile operator, with a market share of 22%, compared with T-Mobile UK’s 15%. France Telecom declined to comment. Deutsche Telekom, and JPMorgan, its adviser, declined to comment.

The Financial Times Limited 2009

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