Vodafone is the world's biggest mobile company, and would become the dominant force in the UK market with a 40% share or more than 35 million customers if it gets T-Mobile.
Industry experts said that knocking out one of the UK's five mobile networks would allow the remaining four to raise their prices by as much as 5% over time.
Vodafone's new chief executive Vittorio Colao has made no secret of the fact that he wants the firm to be the dominant force in each of the countries in which it operates.
“This looks like something of a sighting shot,” said one commentator today. “Vodafone may be trying to get its pitch in early or the Germans may simply be trying to get a real auction going.”
T-Mobile owner Deutsche Telekom, which is itself owned by private-equity giant Blackstone and the German government, this month wrote down the value of T-Mobile UK to just £3.2 billion after a year in which it shrank faster than its rivals in this country. T-Mobile has particularly heavy exposure to pre-paid customers — the least profitable end of the market — while Vodafone has a greater proportion of higher-margin contracts.
Vodafone is said to be considering a bid of £2.5 billion-£3.4 billion.
Earlier this month, France Telecom, the owner of Orange, denied reports that it had made a bid for T-Mobile which was rejected as too low.
Deutsche Telekom has appointed JPMorgan to investigate its options for T-Mobile UK. These could range from selling it, to merging it with a rival or simply holding on to it.
T-Mobile's new managing director Richard Moat, poached from Orange's Romanian operation, officially begins work today and is expected to instigate a widescale shake-up.
Despite a major marketing campaign, including the Trafalgar Square flash-mob advert, T-Mobile has been losing market share.
One analyst said: “Exiting the UK would not be a great miss for T-Mobile. If you look at their position now, they have got to strengthen it by making investments or do something else.”
The company has probably the strongest 3G network in the UK following its deal to share masts with Hutchison Whampoa-owned 3.
Vodafone recently struck a similar mast-sharing agreement with O2, the country's largest operator, which is owned by Spain's Telefonica.
With a combined market share of 40%, any takeover of T-Mobile is bound to attract the attention of both UK and European competition authorities. But consolidation has been happening rapidly in the mobile business and the UK is the only country in Europe which still has five competing networks.
Analysts also pointed out that if the T-Mobile's Virgin business was sold on Vodafone would probably clear any regulatory hurdles.
Terence Sinclair, analyst at Citigroup, said he thought a combination of the two UK businesses could boost Vodafone's earnings by £200 million to £300 million within three to five years.
Other analysts said they did not think now was the right time for Deutsche Telekom to sell out of the UK.
Michael Kovacocy at Daiwas said: “The risk of overpaying or being left to deal with T-Mobile's messy UK operations should not be overlooked.”
T-Mobile is the smallest of the big four networks in Britain with around four million of its 16.7 million customers actually subscribers to Virgin Mobile. Industry watchdog Ofcom said that in the final quarter of 2008 Vodafone had UK revenues of £766 million, O2 had £744 million, Orange £688 million and T-Mobile £565 million.
T-Mobile also has by far the lowest spend per customer in the UK at just £38.60 in the same quarter compared with £57.70 at Vodafone, £53 at O2 and £50 at Orange.