Vodafone prepares T-Mobile bid


T-Mobile parent Deutsche Telekom has appointed JP Morgan to advise on strategic options for its T-Mobile UK business, with reports claiming again that Vodafone is considering a bid for the unit.

Vodafone had already been reported to have offered its Turkish business in an exchange deal for T-Mobile’s UK division. Vodafone chief executive Vittorio Colao (pictured) is keen to force consolidation in the busy UK market place.

Vodafone has already combined with 3 in Australia, on Colao’s order.

A deal for T-Mobile UK, which has a 15 per cent share of the market, would see Vodafone’s UK business leapfrong market-leader O2 with a 40 per cent customer share.

Any deal would invite close scrutiny from regulator Ofcom, in case it should be construed monopolistic and anti-competitive.

However, O2’s 27 per cent share of the UK is considerably less than the shares of market-leaders in other European markets. Orange in France and Telefonica (O2) in Spain, whose UK divisions would likely take issue with a Vodafone purchase of T-Mobile, enjoy around 40 per cent share each in their home markets.

T-Mobile UK suffered a difficult first quarter of 2009, spending liberally on stealing customers away from rivals as it attempted to make up for lower organic revenue than any of them in each quarter of 2008. It signed 53,000 net contract additions in the period, but revenues were down by around 21 per cent, and ARPU was down too.

The German government and US private equity fund Blackstone, which own 32 per cent and five per cent of Deutsche Telekom’s shares respectively, have been pressuring Deutsche Telekom chief Rene Obermann to make a rapid decision on T-Mobile UK.

Obermann moved to lower Deutsche Telekom’s 2009 EBITDA forecast as a result, and wiped off €1.8 million (£1.5bn) from the value of T-Mobile UK on its books.

But T-Mobile UK has appointed Richard Moat, formerly Orange Romania chief, with a brief to improve operating margins quickly. Deutsche Telekom is not urgently seeking a sale, and Moat will be given time to turn around the UK business before it is pressed into selling.

The Financial Times said in its report Monday (June 29) T-Mobile UK has an enterprise value of between €3 billion and €4 billion (£2.6m-£3.4m).