Rival drops out of race for O2

The prospect of a bidding war for telecoms giant O2 receded today after the owner of T-Mobile ruled out joining the race.

Deutsche Telekom said it will not make a rival bid for the UK firm following the recommended offer of £17.7bn (€26bn) by Spanish operator Telefonica.

Karl-Gerhard Eick, finance director of the German firm, said: “Deutsche Telekom will not make a counter-bid for O2. This would not be in the interest of our shareholders.”

Shares in O2 fell more than 5% today to below the 200p that Telefonica agreed on Monday to pay for control.

Mr Eick’s comments ended months of speculation that Deutsche Telekom was looking to take control of O2.

Earlier in the year the company confirmed it had held talks with Dutch telecoms group KPN about tabling a joint offer for O2, thought to be worth around £14bn (€20.5bn).

The talks collapsed in August, ruling Deutsche Telekom out of the bidding for six months, but Monday’s offer from Telefonica meant the Germans could rejoin the race.

The proposed deal between Telefonica and O2 would be the biggest takeover of a UK firm since France Telecom shelled out £31bn (€45.5bn) for Orange in 2000.

The prospect of a bidding war sent O2’s shares soaring 25% to 205.75p on Monday.