Vodafone and Airtouch draw closer to merger

Mobile operators Vodafone and Airtouch are close to signing a £40bn merger agreement, according to reports in the UK national press.

A deal between the US and UK telcos would lead to a pooling of resources in Europe. It would also make them one of the world's largest mobile operators with nearly 40 million customers.

Analysts have favoured a link-up between the two companies for several years but they claim it is now more viable as Vodafone's value has leaped to £23bn - exceeding Airtouch's at £19bn - and is now one the UK's biggest companies. The telco also has a strong presence in France, Germany, Sweden and the Netherlands, while Airtouch holds investments in Italy, Portugal and Spain.

Elaine Axby, telecoms analyst Schema, said a merger would give the firms the economies of scale they need. "They would be able to provide large companies with a consistent level of service that is extensive and efficient," she said. "As the roaming market develops small businesses and consumers would stand to benefit too."

Both companies declined to comment on the speculation.