Shares in Vodafone Group PLC rose Monday after the Financial Times reported that the cell-phone giant is interested in buying T-Mobile UK, the British unit of Deutsche Telekom.
Vodafone spokeswoman Libby Pritchard said the company would not comment on the front-page report from the Financial Times, which did not name any of its sources. Deutsche Telekom and T-Mobile also declined comment.
Vodafone shares led the London Stock Exchange higher, rising 0.7 percent to 116.95 pence ($1.94, euro1.39) in afternoon trade. In Frankfurt, Deutsche Telekom shares were up 2 percent at euro8.40 ($11.80).
Britain's cell-phone market is the most competitive in Europe with five major operators. Vodafone, currently second behind O2, would leap into pole position if it acquired T-Mobile.
Telefonica-owned O2 currently has a 27 percent market share, Vodafone 25 percent and T-Mobile 15 percent.
Telecoms analysts said a Vodafone deal for T-Mobile would make sense because the cut-throat competition among five companies has made profits for any of them particularly hard to come by in Britain. The market includes France Telecom's Orange with 22 percent of customers and Hong Kong's Hutchison Whampoa with just 3 percent.
The Financial Times said Deutsche Telekom has already appointed JPMorgan to explore potential suitors for offloading T-Mobile, which has struggled for years to perform as strongly as its German parent.
"Given that similarly dominant players exist in France, Italy and Spain, the UK regulators might let this one through," said Manoj Ladwa, senior trader at ETX Capital. "Expect some volatility in UK telco stocks as the market makes up its mind whether it likes this potential deal and whether it thinks that Vodafone can pull it off."
Thomas Friedrich, an analyst at UniCredit in Munich, cautioned that any Vodafone acquisition of T-Mobile would have to clear potentially unattractive hurdles, including regulators' orders to sell off assets or interests to competitors. He said the Financial Times' estimated sale value of T-Mobile, euro3 billion to euro4 billion ($4.2 billion to $5.6 billion), "would be attractive" to Telekom if it received such an offer.
In February, Vodafone and Hutchison Whampoa announced a deal to combine their units in Australia.
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Associated Press writer Geir Moulson in Berlin contributed to this report.
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