The chief executive of Vodafone gave his clearest signal yet that the mobile phone operator was looking to buy T-Mobile UK to recapture market leadership in Britain.

Vittorio Colao, who succeeded Arun Sarin in May, emphasised yesterday that he could not discuss individual situations. However, he said there was a clear case for consolidation in the UK, the only developed mobile market in which five operators compete.

He said: “I’ve said a number of times and for many years that the UK has more operators than the other markets, which means more investment in infrastructure being fragmented, and this does not lead to lower prices for customers — just a more inefficient system.

“Where you have margins in the low 20s [in percentage terms], and for some operators below that, around 9 [per cent] on capital expenditure and add a dash of working capital and there isn’t much left. It qualifies for a consolidation case. Whether that happens is another case.”

Mr Colao said that there was no reason why T-Mobile UK should not be bought by a competitor, even if it took the buyer’s market share above 40 per cent, which would be the case if either market leader O2 or Vodafone were permitted to launch a takeover.

He said: “The only thing I can say is that if there is a consolidation opportunity in any of our markets, we will look at it, but there has to be a positive for our shareholders.”

Mr Colao insisted that, if Vodafone did embark on acquisitions, they would be funded by borrowing or through existing free cashflow rather than a rights issue.

He added: “It’s unlikely, at the current stock price, that we would issue new equity as it’s too expensive.”

He was speaking as Vodafone reported revenues of £10.74 billion for April, May and June, up 9.3 per cent on the same quarter last year, but down 2.4 per cent on a like-for-like basis. The results were in line with forecasts.

Mr Colao, who reiterated previous guidance on the full-year figures, said Vodafone had enjoyed good growth in emerging markets, singling out India and South Africa, where Vodafone recently raised its stake in local market leader Vodacom to 65 per cent.

However, revenues in Germany, Vodafone’s biggest single market, dropped by 4.8 per cent, while in Spain they fell by 8.1 per cent. Mr Colao said this represented a “steady” performance given that many of Vodafone’s European operations were trying to trade through a recession.

In the UK, where Vodafone lost a net 159,000 customers during the quarter, it saw a 4.7 per cent fall on a like-for-like basis as revenues from traditional “voice” calls sank from £822 million a year ago to £726 million.

Mr Colao attributed this to some business customers cutting costs by taking fewer lines or asking employees to use their company-supplied mobiles less.

He said retail customers had been switching to more competitive tariffs and Vodafone was working hard to reposition its brand in the UK as a way of combating this.

Andy Halford, Vodafone’s chief financial officer, said: “There has been a perception that Vodafone has been high price and high quality and, in a recession, that’s not an ideal place to be. The broader the range [of tariffs], the better.”

Mr Colao said it was unclear which of Vodafone’s rivals had been snaring its customers during the period, but indicated that he thought many could be going to O2, which has an exclusive distribution deal for Apple’s iPhone.

He said: “ I do consider O2 to be the big competitor in this country and they are the ones we have our eye on because we want to beat them.”

Shares in Vodafone rose 3.4p to 120.25p.

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