VODAFONE was at the centre of speculation yesterday over a potential move to snap up rival T-Mobile UK and take pole position in the British mobile phone market.

The telecoms firm is understood to be mulling over a bid for Deutsche Telekom’s T-Mobile operations in the UK, or a possible joint venture tie-up, according to a report in the Financial Times.

A takeover of T-Mobile would give Vodafone a 40 per cent share of the market by revenue and a near 50 per cent share by customer numbers, with some 35 million subscribers.

But market experts said any deal between the two would create major regulatory concerns over competition in the UK market.

Vodafone’s reported interest comes as the FT said Deutsche Telekom, T-Mobile’s owner, had appointed JP Morgan to advise on strategic options for the business after several years of under-performance.

T-Mobile has about 15 per cent of the UK market and is believed to have an enterprise value of between £2.5bn and £3.4bn.

But, it has just had three quarters of negative sales growth amid tough conditions for mobile phone operators as they battle against the recession and stiff competition.

The sector is already consolidating, where possible, to cut costs and Vodafone’s chief executive, Vittorio Colao, recently said his company was willing to play an active role in such moves between operators.

Less than a month ago, it completed a merger between its Australian operations and those of Hutchison Whampoa as part of the drive.

However, a deal with T-Mobile in the UK would change the face of the mobile market significantly and put Vodafone on a collision course with regulators, analysts said.

Tom Gidley-Kitchin, analyst at Charles Stanley stockbrokers, said while the deal would fit in with Vodafone’s strategy, regulation in the UK would be a “major stumbling block”.

The two firms may also struggle to agree on price at a time when valuations are depressed, and he added: “Everyone is aware that T-Mobile is potentially up for sale and it’s very likely that Vodafone would be interested, but it’s a question of price and regulation – Deutsche Telekom may just decide to pull the sale.”

There is hope for Vodafone, given that the UK is the only major European market with five mobile operators, while other markets such as France, Italy and Spain already have single operators with shares of at least 40 per cent.

In the UK, O2 – which is owned by Spain’s Telefonica – is the largest operator in the UK, with a market share of 27 per cent.

Vodafone has 25 per cent, France Telecom’s Orange holds 22 per cent, while 3, the operator which is owned by Hutchison Whampoa, has eight per cent.

T-Mobile also has a network sharing deal with 3, which could make any regulatory decision even more difficult, said Ovum senior analyst Steven Hartley.

He also believed Deutsche Telekom may yet want to give T-Mobile’s UK management – which was only appointed less than a month ago – some more time to turn the business around.

‘‘They are not in desperate need to offload it and I doubt they could get a lower price in the current market, said Mr Hartley.

Operators have been complaining about fierce competition in the UK, with Vodafone recently reporting a 1.1 per cent fall in UK revenues for its most recent financial year.