• MOST READ

• LATEST NEWS

Deutsche Telekom has fired the starting gun in the race to acquire its T-Mobile UK arm, and all the top three UK cellcos may be in the running. Before the summer, a deal with Vodafone was widely expected - perhaps as an asset swap for Vodafone Turkey - but then the German giant appeared to go cool on a hasty sale, and prefer to give new UK chief Richard Moat time to turn the unit around and potentially increase the price. Moat has scarcely had time to achieve that yet, but the London Financial Times has been told by the traditional "people familiar with the matter" that early-stage talks are underway with Telefonica O2, Vodafone and France Telecom/Orange.

All three had expressed interest in T-Mobile before the summer but only Vodafone appeared to have come up with a concrete proposal. Of course, a three-horse race will benefit DT in terms of the price, and analysts are already looking for T-Mobile UK to sell for at least €4bn ($5.73bn), up from the €3.5bn valuation put on the company in June.

German sources said they expected "significant progress" on a deal by the end of October, but this will be a complex transaction and it could take longer to finalize. There will there be regulatory hoops to leap. Although UK regulator Ofcom sent out positive signals before, indicating it thought the market was fully competitive, a combination of T-Mobile with Vodafone or market leader O2 would create a cellco with over 40% share. This is not unprecedented, since other European countries like France also have dominant suppliers, but these have their huge share based on previous incumbency rather than subsequent M&A. And there are other complications, such as the fate of T-Mobile's RAN sharing deal with 3, and the outcome of Ofcom's bid to redistribute 900MHz spectrum held by Vodafone and O2.

Meanwhile, amid the negotiations, Moat will be looking to boost T-Mobile's value further (and give its parent the option of retaining it if offers prove too low) by demonstrating clear signs of recovery. He has already had some limited success - the UK arm saw its pre-tax margin improve in the second quarter, from 13.5% in the first period to 17.3%, and Moat says it will improve further in the current quarter, and that he is determined to overtake Orange to become the UK's number three operator. In Q1, DT took a €1.8bn impairment charge mainly due to the poor performance of its UK unit.

Related Stories

COMMENTS

No comments yet. Be the first to add a comment!

Digital Money: The Convergence of Contactless Card and Mobile Payments

This report examines the emergence of digital money from the perspective of the convergence of card-based proximity payments to the...

Cloudbooks: Market Analysis and Forecasts
This report is based on interviews with device OEMs, retailers and resellers and provides a comprehensive analysis of the new cloudbook...