Summary
Vodafone is seriously looking at taking over T-Mobile UK. This would lead to a 40% market share, way ahead current market leader O2. Vodafone has been focussing increasingly on the developing markets over the last three years, with minor fixed acquisitions in Europe. In that respect, being a potential consolidator in one of the most competitive and largest European markets, might come as a surprise.
Analysis
Vodafone's potential bid on T-Mobile UK would give Vodafone a 40% market share in UK's current 5 player market. Consolidation has been expected for a while in the UK, where prices have been going down with strong players O2/Telefonica, Vodafone, T-Mobile, Orange and Hutchison 3.
T-Mobile UK has been struggling over the last year, losing 1/6th of it's market share. Earlier Orange placed a bid on T-Mobile UK, which was rejected by Deutsche Telekom. Pulling out of the UK market might be a financial interesting option for Deutsche Telekom, despite it being a significant blow to it's global presence ambitions. It might indicate a further focus to more profitable and growing geographies.
A consolidation in the UK market might lead to less pressure on pricing, which is already under pressure due to multiple MVNO's and European regulation. From the cost saving side, networks can be shared, but it will take a few years before synergies can be optimally used. In the short-term savings can be found in the OPEX area, whereas cost savings on CAPEX will be more mid-term, when GSMs networks can be closed and LTE investments start.
