Newspaper article The Journal (Newcastle, England)

Deal Rumours over Vodafone and T-Mobile

Newspaper article The Journal (Newcastle, England)

Deal Rumours over Vodafone and T-Mobile

Article excerpt

Byline: Iain Laing

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.

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.

But market experts said any deal between the two would create major regulatory concerns over competition in the UK market.

Meanwhile, Deutsche Telekom, T-Mobile's owner, has 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 pounds 2.5bn and pounds 3.4bn.

But it has had three quarters of negative sales growth amid 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.

Less than a month ago it completed a merger between its Australian operations and those of Hutchison Whampoa as part of the drive.

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. …

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