Battle for T-Mobile UK hots up

T-Mobile UK revenues slumped 21 per cent in the first quarter

More details are emerging about the ongoing attempts to buy T-Mobile UK, the struggling mobile operator owned by Deutsche Telekom.

A first wave of reports, citing sources involved in acquisition discussions, said that Spain's Telefónica, which owns O2, had put in a conditional offer of about £3.5bn, as had Vodafone.

Both offers were discussed by the Deutsche Telekom board at the end of last month, according to a report in The Times, but were below chief executive René Obermann's expectations.

A second wave of reports, meanwhile, suggested that Obermann is more likely to take advantage of a third opportunity, in which T-Mobile would pair up with Orange, which is owned by France Telecom.

The joint venture would allow Orange and T-Mobile to combine networks, thereby cutting costs and potentially providing more competitive service rates for customers.

The UK mobile phone market is dominated by O2, which has 27 per cent of the market, followed by Vodafone with 25 per cent, and Orange with 22 per cent.

Any purchase of T-Mobile would have to be approved by Ofcom, which is more likely to sanction the deal that offers the most competition in the market.

It has been suggested that Deutsche Telekom wants to sell T-Mobile because the UK has the most competitive market in Europe.

T-Mobile UK recorded a drop in revenues of around 21 per cent in the first quarter of this year.

A decision by Obermann and T-Mobile shareholders is expected in few months' time.

Vodafone shareholders told the company in July that it should not buy T-Mobile because of the expense of the merger. Vodafone UK turned over £1.18bn in the most recent quarter compared to £1.23bn in the same period last year.

Vodafone Group chief executive Vittorio Colao said at the time that consolidation would be "quite a good thing" in the UK, as there are too many networks chasing too few customers.

Neither T-Mobile nor any of its potential suitors would comment on the media reports.