O2 could join T-Mobile UK bidding war

New reports suggest Telefónica bosses are mulling a bid

Phil Muncaster, V3.co.uk 03 Jul 2009

O2 may join the race to acquire T-Mobile UK, after reports suggested that O2 parent Telefónica is looking at the case for buying the struggling operator.

It is thought that O2 has been spurred into action after fears that it may lose its position as the mobile market leader in the UK, according to reports in the Financial Times.

O2 currently has 27 per cent of the UK market, compared to Vodafone's 25 per cent, and would jump into an unassailable lead with 40 per cent if it was able to snap up T-Mobile.

T-Mobile owner Deutsche Telekom is looking to sell the UK operation, which analysts value at €3bn to €4bn (£2.6bn to £3.4bn), according to the FT report, which cites "people familiar with the situation".

Other reports, meanwhile, suggest that Orange owner France Telecom is considering a joint venture between Orange and T-Mobile UK, paving the way for a potential bidding war.

Harry McDermott, chief executive at telecoms consultancy Hudson & Yorke, warned that, if T-Mobile was acquired and thus severed from its parent company, it would no longer have access to T-Systems, one of the leading global providers of managed and outsourced telecoms services.

"This could potentially limit the provision of competitive managed mobility services to the enterprise market, or at the very least impact the adoption of such services," he said.

McDermott also argued that any purchase of T-Mobile would necessitate a disaggregation of network sharing deals. T-Mobile UK and 3 currently have a joint venture infrastructure agreement, as do Vodafone and O2.

"It will be interesting to see what will happen to the joint ventures. Either way, this is potentially a big distraction for all the parties," he said.

O2 declined to comment on the reports.

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