[Ben]

http://www.theregister.co.uk/2009/09/04/tmobile_three_way/

Deutsche Telekom is in early talks with three companies to sell off its UK mobile business T-Mobile.

The future of Britain's fourth placed mobile firm has been in doubt for some time. In the summer advisers JP Morgan were appointed to find buyers for the firm.

Deutsche Telekom is talking to Vodafone, France Telecom and Telefonica. An anonymous source told the FT:“If we’re lucky, we could end up with a three-horse race.”

The source also reckoned that the slight improvement in the economy meant that the price for T-Mobile had also risen from about £3bn in July to nearer £4bn now. Which is still a fraction of what the firm paid for its 3G license.

A deal is unlikely to be hammered out before October at the very earliest. Any cash raised would help Deutsche Telekom strengthen US business.
I'd prefer a Vodafone or Telefonica buy, in all honesty. While a France Telecom buy may bolster the Orange network in the UK, I think it's fair to say that Orange are more of a multiple-play service provider in the UK these days than leaders in mobile. That's what it feels like, anyway.

[Hands0n]

God no! Not France Telecom. They've already ruined one perfectly good UK mobile network operator. They'd wreck T-Mobile also ...

[miffed]

Exactly what I was thinking !! Anyone but France Telecom.... or Hutchinson Whampoa !
Although to be fair , the latter did a good job with Orange , ...then the former turned it into a joke.

[a_ukboy]

I'm confused, i thought another UK operator could not buy another UK Network?? Did that not happen to Orange a few years back and then have to be sold quick??

[Ben]

Depends on competition rulings. Back in the day when Vodafone bought Orange (it was complex but that's the basics AFAIK) it wasn't acceptable. These days? Well, in the UK we probably have one of the most competitive mobile climates in the world so it's likely consolidation will be allowed.

[getti]

Sunday Times have today said :


Vodafone and the owner of O2, Telefonica of Spain, have tabled conditional offers to buy T-Mobile UK as the race to create the biggest force in Britain’s mobile-phone industry gathers pace.

Both are believed to have bid about £3.5 billion for the business, which has 16.6m customers but lags behind its two big rivals and is being touted for sale by German owner Deutsche Telekom. The auction is now in its late stages and a decision is expected within weeks.

The offers, discussed by Deutsche Telekom’s board at the end of last month, have come in beneath the expectations of Rene Obermann, the Bonn group’s chief executive. He is thought to prefer a third proposal submitted by France Telecom to merge T-Mobile UK with Orange. However, it is possible all the proposals could be rejected.

All three operators believe combining with T-Mobile UK is a one-off chance to create a powerful market leader. Any deal would be heavily scrutinised by telecoms regulator Ofcom as well as by Brussels, which has led a campaign for mobile operators to slash charges.


The deal would give Vodafone a 40% share of mobile-phone revenues and Telefonica, the current No1, a 43% share. To avoid the threat of a deal being blocked, Telefonica and Vodafone have already proposed various concessions, which is why the bids are conditional.

However, Obermann is reluctant to sell at today’s price of £3.5 billion. At that level, it would result in another writedown for the division, which he is desperate to avoid. This would put him under further pressure from shareholders, which include the US private-equity firm Blackstone.

Deutsche Telekom took a £1.6 billion hit on T-Mobile in May after a spell when it lost customers to rivals and margins declined. It wrote down the division’s value to £4.5 billion, including £1.2 billion of debt.

Bankers believe T-Mobile UK has a stand-alone value of £2.5 billion, but could be worth a further £1 billion in combination with another operator. Analysts estimate that linking it with a rival could boost earnings of the enlarged business by up to £300m in three to five years from a combination of cost savings and reduced competition.

Vittorio Colao, Vodafone’s chief executive, has made it clear he is keen on consolidation to drive up profitability and earlier this year combined his Australian subsidiary with that of rival operator 3. The British operator also harbours ambitions to win back its domestic crown from Telefonica, which has extended its lead in the past year, helped by its exclusive deal to supply Apple’s iPhone handset.

An acquisition would build up the empire of Matthew Key, Telefonica’s north European boss outside Spain.

Britain is the only large mobile-phone market in Europe to feature all four of the big players and one of the few where a dominant operator does not have a market share above 40% as in Italy, France or Spain.

According to Enders Analysis, T-Mobile UK has a 14.9% market share of revenues, significantly behind Orange with 21.5%, Vodafone with 24.7% and O2, which leads the way with 27.7%.

Either buyer could offer to hive off T-Mobile’s wholesale operation, which provides airtime to Virgin Media’s 3.2m mobile customers. Other concessions could include giving up slices of mobile spectrum or capping how much they can bid for in future spectrum auctions. Telefonica could also sell out of its mobile joint venture with Tesco.

Obermann may still withdraw T-Mobile UK from sale. In July, he put new management into the business with a brief to turn it round and rebuild profit margins. However, shedding its UK arm would allow Deutsche Telekom to concentrate on its flagging American subsidiary.

The industry has been hunting for cost savings as revenue growth across Europe slows down as the mobile sector matures.

[Ben]

It's crazy that O2 have notched up a 27.7% share of the UK market with their 'strategy'! With all the networks currently enjoying relatively equal share, however, it seems slightly insane to let one shoot to over 40% - it's difficult to see how this wont harm competition. Perhaps the smaller rivals will become more agile and innovative or, as is probably more likely, there'll be further consolidation and we'll have just two or three physical networks from five within a few years.

I want strong, profitable mobile networks and I want great coverage and services for the consumer. I just don't know if any of the proposals to snap up T-Mobile are going to help achieve that.

[Hands0n]

We can witness the effects of consolidation in the Cable TV industry. Now, as a single giant, there is almost no will, desire or intention to innovate. It is only the likes of Sky that keeps VM on it's toes.

To see the UK return to a duopoly in mobile networks would be a disaster. The toothless and unwilling OFCOM would be of little benefit to the consumer. Perhaps less so even than it is now. The EU to our rescue? Perhaps, but maybe not if there is no viable successor to Viviane Reding. Imagine her successor being in the mobile cartel's pocket!

Market forces dictate that the weak will fail. T-Mobile find themselves in that position with a parent company that does not want to support them in a foreign market.

Similar could easily happen with Orange and even O2. I am only surprised that 3 are still banging along.

[getti]

Taken from Reuters


Deutsche Telekom's subsidiary T-Mobile UK and France Telecom's Orange are set to announce they are in exclusive talks to form a joint venture, sources familiar with the situation said.

Both firms declined to comment, but three sources familiar with the situation told Reuters that the two firms were hoping to announce as early as Tuesday that they were in exclusive talks on forming a venture. The sources cautioned that the deal could still fall apart, however.

Deutsche Telekom is currently considering its options for the UK unit which has struggled in the highly competitive market where five operators and several smaller players compete.

In the past Chief Executive Rene Obermann has said the Bonn-based company was open to all options after the UK arm took an impairment writedown of 1.8 billion euros in the first quarter of the year.

Media reports on Sunday said Vodafone and Telefonica had tabled preliminary bids at 3.5 billion pounds and analysts have suggested that this was not enough.

Any consolidation within the UK market will also likely draw the attention of regulators. Telefonica's O2 currently has about 27 percent of the market in Britain, followed by Vodafone with 25 percent, Orange with 22 percent, T-Mobile with 15 and Hutchison Whampoa's 3 UK with 8 percent.

Analysts have been divided over the merits of a joint venture or a straight sale, with some arguing that a joint venture could be complicated unless one group takes control.

All four mobile groups have declined to comment on the situation.[/QUOTE]

[Ben]

Not exactly the outcome most of us would want. A massive France Telecom. Woo-feckin-hoo.

Still, at least O2 and Vodafone are probably strong enough to compete - and I would imagine they would go at it tooth and nail to try and whittle the combined T-Mobile/Orange customer base down a bit.

[Hands0n]

They won't have to try very hard. France Telecom will knob up the joint venture much as they have Orange!

[gorilla]

I wonder if we'll see 3 being acquired by either Vodafone or O2? Them lot have been complaining for a long time that the UK market is not big enough to sustain 5 operators and if 3 continue on their road no one in their right might would acquire them in order to compete against a 'big 4'.

[3g-g]

Well according to el Reg (http://www.theregister.co.uk/2009/09/08/t_orange/), both Virgin and Three are more than happy with the deal... why wouldn't they want to be part of the biggest network in the UK? Leaving it as they are means not having to hop off onto O2 or Vodafone, which will be significantly smaller networks, both coverage/number of sites wise and customer base.