Vodafone is considering a bid for T-Mobile UK, according to the Financial Times.
Vodafone is currently the world's largest mobile operator by revenue and if the deal went through, the two companies would create the UK's largest mobile operator with a market share of 40%.
Deutsche Telekom, which owns T-Mobile UK, has appointed JPMorgan to advise on strategy. T-Mobile has an estimated value of €3bn-€4bn and has been underperforming for several years.
The transaction may be blocked by UK telecoms regulators though, as the move could be seen as anti-competitive. However, some analysts say regulators may allow one operator to hold a 40% share of all revenue paid by British mobile users, as such circumstances do exist in France, Italy and Spain.
Currently, O2, owned by Spain's Telefonica, is the largest UK mobile operator at a market share of about 27%, with Vodafone next at 25%, France Telecom's Orange at 22%, T-Mobile 15% and Hutchison Whampoa-owned 3 at 8%.