BERLIN, Sept 6 (Reuters) - Deutsche Telekom is seriously considering a joint venture instead of a sale for its struggling British wireless unit, T-Mobile UK, and a decision was seen near, several sources familar with the company's position said.
Last month, Deutsche Telekom's supervisory board gave management the green light to sound out three options for the UK business, the sources said.
The options are a sale, keeping the business and restructuring it, or a joint venture with another operator in the crowded British market where five operators compete for customers.
A joint venture is the current favoured option and a decision was expected to be made soon, one of the sources said.
Deutsche Telekom declined to comment.
Some analysts have said a joint venture between Deutsche Telekom and France Telecom was possible in light of several deals the two companies had made in the past over assets in Spain and the Netherlands.
France Telecom, the owner of the third-biggest British operator Orange, has said publicly that it was not interested in buying T-Mobile UK, but industry insiders point out that that would not rule out a joint venture or partnership.
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 this year.
The figures underline the need for an urgent fix: T-Mobile UK's operating margin is around 14 percent, significantly below the 31-percent average of Deutsche Telekom's mobile businesses in other countries.
A media report on Sunday citing unidentified sources said Vodafone and Spain's Telefonica, the owner of O2, have tabled conditional offers of about 3.5 billion pounds ($5.72 billion) to buy T-Mobile UK.
Vodafone and Telefonica declined to comment.
Analysts said last week T-Mobile UK would be worth buying at a price of 4 billion euros ($5.71 billion) for either of the two top British operators, Telefonica's O2 or Vodafone.
But any would-be acquirer would also have to take into account the risk that a deal could be blocked by Britain's competition regulator, which said in July it was happy with the state of competition in the market.
O2 currently has about 27 percent of the market in Britian, followed by Vodafone with 25 percent, France Telecom's Orange with 22 percent, T-Mobile with 15 percent and Hutchison Whampoa's 3 UK with 8 percent.
A consolidation of the major players would still leave 3 unhindered in its disruptive pricing behaviour that has contributed significantly to price erosion in Britain, for example, by launching a Skype phone for Internet calling.
JP Morgan has been conducting a strategic review of the business, which is under the new management of Richard Moat, assessing the company's stand-alone options as well as the viability of a sale, banking sources have said.
($1=.6123 Pound)
($1=.7008 Euro)
(Reporting by Nicola Leske and Nikola Rotscheroth; editing by Maureen Bavdek) Keywords: DEUTSCHETELEKOM/UK (nicola.leske@thomsonreuters.com; +49 69 7565 1214; Reuters Messaging: nicola.leske.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Last month, Deutsche Telekom's supervisory board gave management the green light to sound out three options for the UK business, the sources said.
The options are a sale, keeping the business and restructuring it, or a joint venture with another operator in the crowded British market where five operators compete for customers.
A joint venture is the current favoured option and a decision was expected to be made soon, one of the sources said.
Deutsche Telekom declined to comment.
Some analysts have said a joint venture between Deutsche Telekom and France Telecom was possible in light of several deals the two companies had made in the past over assets in Spain and the Netherlands.
France Telecom, the owner of the third-biggest British operator Orange, has said publicly that it was not interested in buying T-Mobile UK, but industry insiders point out that that would not rule out a joint venture or partnership.
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 this year.
The figures underline the need for an urgent fix: T-Mobile UK's operating margin is around 14 percent, significantly below the 31-percent average of Deutsche Telekom's mobile businesses in other countries.
A media report on Sunday citing unidentified sources said Vodafone and Spain's Telefonica, the owner of O2, have tabled conditional offers of about 3.5 billion pounds ($5.72 billion) to buy T-Mobile UK.
Vodafone and Telefonica declined to comment.
Analysts said last week T-Mobile UK would be worth buying at a price of 4 billion euros ($5.71 billion) for either of the two top British operators, Telefonica's O2 or Vodafone.
But any would-be acquirer would also have to take into account the risk that a deal could be blocked by Britain's competition regulator, which said in July it was happy with the state of competition in the market.
O2 currently has about 27 percent of the market in Britian, followed by Vodafone with 25 percent, France Telecom's Orange with 22 percent, T-Mobile with 15 percent and Hutchison Whampoa's 3 UK with 8 percent.
A consolidation of the major players would still leave 3 unhindered in its disruptive pricing behaviour that has contributed significantly to price erosion in Britain, for example, by launching a Skype phone for Internet calling.
JP Morgan has been conducting a strategic review of the business, which is under the new management of Richard Moat, assessing the company's stand-alone options as well as the viability of a sale, banking sources have said.
($1=.6123 Pound)
($1=.7008 Euro)
(Reporting by Nicola Leske and Nikola Rotscheroth; editing by Maureen Bavdek) Keywords: DEUTSCHETELEKOM/UK (nicola.leske@thomsonreuters.com; +49 69 7565 1214; Reuters Messaging: nicola.leske.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.