The Financial Times has reignited speculation that Deutsche Telekom could be close to offloading its struggling UK mobile arm, T-Mobile UK, to a rival UK mobile operator. According to people familiar with the matter, the German firm is in talks with Vodafone, France Telecom (Orange) and Telefonica (O2), although negotiations are understood to be at a preliminary stage. “If we’re lucky, we could end up with a three-horse race,” said one person briefed about Deutsche Telekom’s plans. The source added that the recent uplift in the UK economy had raised hopes that the business could fetch EUR4 billion; the unit was valued at around EUR3.5 billion when a sale was first touted at the end of June. Sources in Germany said that significant progress on a deal could be made by mid to late-October, although other people close to the potential bidders said closing any deal would take longer. None of the operators rumoured to be involved in a deal were prepared to comment and neither was JPMorgan, the US bank that Deutsche Telekom hired to explore “strategic options” for T-Mobile UK this summer.

Deutsche Telekom installed a new managing director (Richard Moat) at the unit in June and has pledged to turn around the business. T-Mobile UK showed signs of improvement in 2Q09; its EBITDA margin in the UK rose to 17.3 percent in the quarter compared to 13.5 percent in 1Q09, but was still down on the year-ago quarter. Moat forecast that the margin would increase in the third quarter compared with the second, and said he was looking for further improvement in the final quarter of the year. The Financial Times notes that the unit’s improving performance will not only make it more attractive to its three larger UK rivals but will also allow the German parent to cancel a sale and continue to operate the subsidiary if it deems any bids too low.