Orange receives £16bn bid

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Mobile phones group Orange has received an approach that could lead to a takeover offer from Germany's Mannesmann, it was announced today.

Mobile phones group Orange has received an approach that could lead to a takeover offer from Germany's Mannesmann, it was announced today.

The number three mobile operator in the UK is valued at £ 16 billion on the stock market, but analysts said a bidder would have to pay a significant premium on top of that to gain control of the highly respected company.

Any takeover would have to receive the blessing of Hong Kong-based Hutchison Whampoa, which owns more than 40% of Orange's shares.

A deal would come as the latest in a rash of consolidation in the global telecoms market.If Mannesmann succeeded in a takeover, the move would give it a strong foothold in the UK.

Confirming its approach, Mannesmann said in a statement: 'A further announcement will be made as and when appropriate.'

Given the German group's lack of presence in the UK, few redundancies if any would be expected among Orange's 6,000 British workers.

Figures for earlier this month showed Orange's mobile customer base had grown by 520,000 to 3.48 million in the third quarter of the year - more than double its growth at the same period last year.

It recently won praise when regulator Oftel said it had the best-performing network of Britain's four mobile companies.

The group also has interests in France, Germany, Austria, Switzerland and Belgium.

Orange last year posted operating profits of £15.4 million on turnover of £1.2 billion, although the group is still making overall pre-tax losses from its heavy investment programme.

Nigel Hawkins, telecoms analyst at stockbroker Williams de Broe, predicted Mannesmann would emerge as the possible bidder, but that it would have to pay around £20 billion for the company.

'Mannesmann has done extremely well in Germany competing against Deutsche Telekom and is trying to replicate that success in other countries,' he said.

He added that Orange was very well thought of in the global telecoms industry, having fought its way up into the number three spot despite being a late entrant.

Being taken out by a bigger rival could benefit Orange when bidding starts for licences to run the so-called Third Generation mobile networks, which will be capable of giving fast Internet access to people's handsets.

'Orange will need a lot of investment and it will all be about economies of scale,' said Mr Hawkins.

Orange's main sites in Britain are at Bristol, Darlington, Newcastle, Peterlee in County Durham, Hertford and Central London.

News of a possible takeover bid for mobile phones group Orange helped stave off falls on the FTSE-100 Index today.

Orange rocketed 8% - by 104p to £ 14.43 - in the opening minutes as dealers hoped to see a bid from Germany's Mannesmann come in at around £ 20 billion.

But despite seeing 6.3 million Orange shares change hands, it was Vodafone AirTouch which was the heaviest traded stock.

Vodafone fell 7\p to 276}p as dealers feared its hoped-for takeover of Mannesmann would now be impossible. A combination of taking over Mannesmann and Orange would probably prove too expensive, dealers said.

The FTSE-100 Index of leading shares was up 23.6 points to 5892.8 in early trading despite fears of a meltdown on the 12th anniversary of the Black Monday crash.

Wall Street had a benign session, although crucial inflation data due this afternoon could spark heavy selling. The Dow Jones Industrial Average ended up 96.57.

Despite Vodafone's falls, other telecoms stocks took heart at the return of consolidation to the sector.BT gained 18{p to 954p, Telewest jumped 3}p to 240p and Colt Telecom gained 59p to £15.80.