-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --
By Eric Auchard
The Financial Times, citing unnamed sources, says Deutsche Telekom is in "preliminary stage" talks with Vodafone, France Telecom, and Telefonica to sell T-Mobile UK.
The logic of such a deal seems to be compelling. DT needs to sell out because T-Mobile lacks the scale to gain an edge over its multiple competitors.
A combination would create substantial value, both for the buyer, and in terms of raising prices in what is one of Europe's most competitive mobile markets. Sanford Bernstein estimates that it could create up to 6 billion euros of value for Vodafone and Telefonica's O2, and up to 5 billion for FT's Orange mobile unit.
But there's a rub. Although the deal creates a lot of value for the winner, it's also worth a lot just being a free-rider and benefiting from improved industry pricing that flows from consolidation. So the marginal advantage of winning shrinks. Unlike a conventional bid battle, where rivals try to thwart the other guy from stealing the prize, everyone is saying "after you, Didier" or "No please Julio, after you. I insist."