Vodafone and T-Mobile quiet on buy-out rumours

Vodafone is remaining tight-lipped on rumours over the weekend that it plans to snap up ailing T-Mobile UK.

Both firms have declined to comment on a report in the Financial Times on Sunday, which cited "people familiar with the matter" as saying that Vodafone is looking at the case for acquiring T-Mobile UK.

Vodafone has 25 per cent of the UK mobile market, behind O2, owned by Spanish firm Telefónica, with 27 per cent. France Telecom's Orange has 22 per cent, T-Mobile 15 per cent and Hutchison Whampoa's 3 has eight per cent.

However, a combined Vodafone and T-Mobile would hold a whopping 40 per cent of the market, and any deal will be closely scrutinised by the regulators, according to Ovum analyst Steven Hartley.

"Ofcom over the last ten years has set out its stall to ensure competition, and it has achieved it, with four of the big operators on a reasonably equal market share," he added.

"It would be a bit of a party shift from Ofcom to [allow] the deal."

He added that Vodafone will have to do a good job on investor relations to convince its shareholders that such a large expenditure is worthwhile, especially in the current economic climate.

"The real benefit to Vodafone would be extending its scale, but that would take time and be costly to do," he said.

Harry McDermott chief executive of consultancy Hudson & Yorke, said any takeover could result in a turbulent time for enterprise customers.

"Existing T-Mobile UK enterprise clients will have to renegotiate their contracts with Vodafone - whose price book and service levels are obviously going to be different to those offered by T-Mobile," he explained.

Shares in Vodafone rose 1.3 per cent on Monday to 117.9p, while Deutsche Telekom, which owns T-Mobile UK, rose 0.8 per cent to €8.30.