Vodafone 'may move for T-Mobile UK'

Vodafone is considering a bid to buy T-Mobile UK

Vodafone is at the centre of speculation over a potential move to snap up rival T-Mobile UK and take pole position in the British mobile phone market.

The telecoms giant is understood to be mulling a bid for Deutsche Telekom's T-Mobile operations in the UK or a possible joint venture tie-up, according to a report in the Financial Times.

A takeover of T-Mobile would give Vodafone a 40% share of the market by revenues and a near 50% share by customer numbers, with some 35 million subscribers.

Vodafone's reported interest comes as the FT said Deutsche Telekom, T-Mobile's owner, had appointed JP Morgan to advise on strategic options for the business after several years of under-performance.

T-Mobile has around 15% of the UK market and is believed to have an enterprise value of between £2.5 billion and £3.4 billion. But it has had three quarters of negative sales growth amid tough conditions for mobile phone operators as they battle against the recession and stiff competition.

The sector is already consolidating where possible to cut costs and Vodafone's chief executive Vittorio Colao recently said his company was willing to play an active role in such moves between operators.

However, a deal with T-Mobile in the UK would change the face of the mobile market significantly and put Vodafone on collision course with regulators, analysts said.

Tom Gidley-Kitchin, analyst at Charles Stanley stockbrokers, said while the deal would fit in with Vodafone's strategy, regulation in the UK would be a "major stumbling block".

The two firms may also struggle to agree on price at a time when valuations are depressed, he added.

"Everyone is aware that T-Mobile is potentially up for sale and it's very likely that Vodafone would be interested, but it's a question of price and regulation - Deutsche Telekom may just decide to pull the sale," said Mr Gidley-Kitchin.