Vodafone and O2 engage in £3.5bn bid for T-Mobile

Vodafone and O2 are both believed to have made £3.5bn bids for T-Mobile in the UK, going head-to-head in the battle to create a mobile phone operator which would dominate the British market.

Both Vodafone and O2, which is owned by Telefonica of Spain, have reportedly made conditional offers, and a decision could come within weeks.

T-Mobile in the UK has been put on the block by its German owner Deutsche Telekom after the phone company was forced to make a £1.6bn write-down on its mobile division earlier this year. The conditional bids are thought to be below the price chief executive Rene Obermann is seeking.

France Telecom has also proposed merging T-Mobile UK with its Orange business, an option reportedly favoured by Mr Obermann. There is a possibility none of the approaches will be accepted; if Mr Obermann sold T-Mobile for £3.5bn, he would need to make another write-down on the business.

If Vodafone made a successful bid, it would have a 40pc share of British mobile phone revenues, and if O2 won it would increase its market-leading position to 43pc. Both companies are reportedly offering concessions to satisfy competition regulations.

T-Mobile currently lies in fourth place in the UK market, behind Orange, with a 14.9pc share of mobile revenues.

Bankers have given T-Mobile a stand-alone value of around £2.5bn, but another £1bn of value could be created by joining forces with a rival because of cost savings and the boost to earnings from reduced competition.

Vodafone and O2 declined to comment.

Source: The Telegraph, 6th September, 2009

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