Battle hots up for T-Mobile bidding

MOBILE phone operators Vodafone and O2 are understood to be locked in a £3.5bn bid battle for rival T-Mobile UK.

Both Newbury-based Vodafone and O2 - which is owned by Telefonica Spain - are reported to have bid £3.5bn for the group which has been put up for sale by its German owner Deutsche Telekom.

T-Mobile has 16.6 million customers, so success for either group would make it the biggest mobile operator in the UK.

But there are concerns that T-Mobile UK could be withdrawn from sale altogether, as the offers, which were discussed by Deutsche Telekom's board at the end of last month, are below the expectations of the group's chief executive, Rene Obermann.

A sale at £3.5bn would lead to Deutsche Telekom having to make another writedown on the division after the group took a £1.6bn hit on the business in May, as a result of it losing customers to rivals and declining margins.

The auction is understood to be in its final stages and a decision is expected to be announced in the next few weeks.

If Vodafone was successful in its bid, the deal would boost its share of the UK mobile market to 40 per cent of revenues and a near 50 per cent share by customer numbers with 35 million subscribers enabling it to overtake O2 and regain its crown as the country's biggest mobile operator. O2 would see its market share jump to 43 per cent if it is successful, building on the increase seen following its exclusive deal with Apple to supply iPhone handsets.

Telefonica is said to be concerned that O2 would lose its market-leading position in the UK if Vodafone goes ahead with an offer. But both offers are conditional as any deal is likely to be scrutinised by telecoms regulator Ofcom.

Bankers are understood to have given T-Mobile UK a standalone value of £2.5bn, but this could rise by a further £1bn if it was combined with another operator.

Agencies