The UK’s largest mobile phone operator, O2, may be considering a bid for fourth-placed rival T-Mobile, it admitted today.
Matthew Key, chairman and chief executive of O2 owner Telefónica Europe, said that while the group was “very happy” with its UK operation, “clearly we are watching the T-Mobile situation with interest”.
“We are not definitely in and we are not definitely out,” he added. “As market leader you would expect us to take a keen interest.”
Investment bankers at JP Morgan are believed to be trying to gauge interest in a potential sale of T-Mobile UK, which is owned by Deutsche Telekom and has been losing ground to its rivals over the past year.Vodafone has already been approached,while O2 has been rumoured to be interested in having a look at its books.
Key’s comments came as O2 announced half year results showing the network added 252,268 new customers in the three months to the end June.
If Vodafone did buy T-Mobile – or swap assets with Deutsche Telekom to secure control of the business – it would catapult the merged group into the number one slot with an estimated 40% of the market. Asked whether O2 would object to one player having this much dominance, Key replied “that’s a question for Ofcom in terms of how they would manage that sort of level of market share”.
As a mark of O2′s success in the UK, Vodafone chief executive Vittorio Colao recently admitted that it is the one company that he wants his UK team to beat. So far, however, second-placed Vodafone has not succeeded: it lost 159,000 British customers in the three months to end June. In the same period, Orange added a mere 3,000 customers.
Speaking at Vodafone’s annual meeting earlier this week, chairman Sir John Bond admitted that “unquestionably” one of the reasons for O2′s success in the UK has been its exclusive deal with Apple to sell the iPhone.
Key said the new iPhone – the 3GS – has been selling well since launched on 19 June. “We sold 50% more over the first weekend of the 3GS compared with the 3G. It is selling fantastically well,” he said.
Its rivals, however, are trying to break into that exclusive deal with speculation that it will come up for renewal in November – two years after O2 started selling the iPhone.
Key refused to comment but emphasised: “We have a multi-year exclusive contract with Apple. We are very happy with them, they are very happy with us, it is mutually beneficial relationship.”
The company, however, has been hoovering up other potential rivals to the iPhone, igniting talk that it is ensuring it has a wide range of other exclusive deals in case it does not have the iPhone to itself in future. Its most recent deal was with Palm and it will stock the much anticipated Palm Pre device on an exclusive basis at Christmas.
Asked whether he was hedging his bets, Key replied: “No, what we are about is bringing the best devices to customers and we believe the Palm Pre, from a customer experience perspective, is a great device.”
Details of what the Palm Pre will cost in the UK have yet to be revealed but it is likely initially to be available only to people willing to sign a long-term contract.
“We will probably do it on post-pay and pre-pay,” said Key. “But whether we will do it on pre-pay this side of Christmas is a different question.”
