Could Vodafone nab 3 UK after T-Orange merger?

Hutchison 'looking for options'

With the merger of Orange UK and T-Mobile UK approved by the European Union, the current UK leaders, O2 and Vodafone, will be mulling their competitive responses. So far, Vodafone has mainly focused on revamping its software brands and its higher-value services, but it could also move to acquire the country's smallest cellco, 3 UK, say analysts.

Shaun Collins of CCS Insight commented in an interview with Mobile Europe: "Firstly such a deal would be competitively appropriate, and secondly Hutchison has been looking for options for 3 UK. It would be inconceivable if the two had not talked about 3 UK being acquired. After all Vodafone and 3 merged their businesses in Australia so there is a track record and the channels for communication are there."

However, some think O2 and Vodafone will be in more serious talks - not about merger, which would be blocked by antitrust authorities, but in a more wide-ranging deal to share networks. They already have a partial collaboration and a full merger of their RANs would create a two-network market in the UK, since 3 already shares with T-Mobile (although one condition of the merger with Orange is a review of this agreement and how it affects competition).

Meanwhile, insiders claim that the joint venture could cut up to 2,000 staff as it pursues cost efficiencies, with the focus on the back office. The firms cannot comment until they are fully merged, but Tom Alexander, head of Orange UK and CEO-designate of the combined company, confirmed that the new firm will start to trade as a single entity early next month, and will then outline a cost saving plan. Between them, the two operators have about 19,000 staff - Orange, based in the southwestern city of Bristol, has 12,500 while T-Mobile, headquartered north of London, has 6,500.

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