O2s share price jumped to 206p on the announcement sparking talk of counter-bids. Analysts suggested that German operator Deutsche Telekom and Dutch operator KPN could re-launch a joint-bid for O2 despite withdrawing from talks in August when O2s share price was closer to 160p.

Ovum research analyst Dan Biesler said: O2s market price traded up beyond 200p following the announcement which suggests that KPN or Deutsche Telekom might jump in – though both said a couple of months ago that they hadnt proceeded for price reasons. So they would have to significantly change their position to bid now.

However Deutsche Telekom counted itself out of the running on Wednesday. Deutsche Telekoms share price dropped five per cent following its statement that it would not launch a counter-bid for O2.

Analysts said that Deutsche Telekom might instead look to purchase Virgin Mobile and that KPN could also be a takeover target.

Nomura telecoms analyst Mark James added: The share price indicated investor anticipation of a higher bid from Deutsche Telekom. But it was by no means certain. KPN holds many of the cards.

James said that Deutsche Telekom would have had to offload O2s German operation in the event of a counter bid so that it wouldnt appear anti-competitive. Much would have depended on the cooperation of KPN which was mooted to take on O2 Germany as part of talks with Deutsche Telekom over the purchase of O2 in August.

James said: Even if Deutsche Telekom doesnt make a higher bid for O2 speculation will intensify that Deutsche Telekom may bid for Virgin Mobile. The 10 per cent rise in Virgin Mobiles share price on November 1 demonstrates that this is already happening.

Biesler said: T-Mobile already counts Virgin mobile customers as part of its network. It sells minutes to Virgin Mobile. It doesnt make sense for it to buy Virgin Mobiles customer base. T-Mobile already has problems with brand and customer service in the UK and such a deal would not fix them.

Virgin Mobile declined to comment on market speculation.

Biesler added: KPN is also a bid target and its recent share performance suggests that there are interested parties out there. There will be more network deals but probably on a smaller scale involving companies such as [French operator] Bouyges Telecom and operators in eastern Europe where growth rates are good and margins high. Operators in western Europe are generating significant cash flow to make such deals possible.

Analysts were unconvinced of the benefits of the Telefonica deal for O2.

IDC senior analyst Paolo Pescatore said: What does Telefonica give O2? How important is Latin America to O2? Vodafone T-Mobile and Orange dont have any presence there so why should O2 want one?

James said: It is difficult to see what the combined entity can do that O2 could not achieve in isolation. Handset vendors are not negotiating from a position of strength. When a company with 25 million customers such as O2 picks up the phone the Nokias of this world come running.

Biesler said: There is a risk of Telefonica meddling in O2s affairs. O2 has carved out a niche for itself – it is young not too trendy and data-orientated. Its branding has been a triumph. There is a danger that if Telefonica meddles too much it could become like Orange where France Telecom has run its brand into the ground.

This week O2 CEO Peter Erskine told BBC Radio 4 Today: The board is recommending it. Obviously the shareholders will have to decide whether they accept it. We would envisage that if they do it would close round about January or February. It is very good for shareholder value. Its an all-cash offer. Its 2 a share which is somewhere in the range of a 25 per cent premium over the past three months.

Avenir sales director Tanny Price said: If something happens it wont be for a while so for us its business as usual. O2 is a very good network. Weve been its number one distributor for the past few months and intend to keep cracking the whip. Weve got some good business in the pipeline and intend to deliver on it.

Also the CWU has sought assurances from O2 about the impact of the takeover on staff.

A CWU statement said: We have been advised that there is no intention to change the business plan or direction of O2 and we will be seeking written assurances that there is no adverse impact for CWU members.

Sky Mobile TV which launched on Monday gives Vodafones new and existing 3G subscribers a chance to try out the service free of charge until the end of January 2006. From February they will have a choice of two unlimited viewing packages each priced at 5 per month.

The News Sport & Factual package gives consumers access to Sky News CNN Bloomberg Sky Sports News At The Races Discovery Factual National Geographic Channel and the History Channel.

The Entertainment & Music package features Sky One Sky Movies two MTV channels Living TV Discovery Lifestyle Nickelodeon Paramount Comedy Cartoon Network Bravo and the Biography Channel.

Vodafone UK chief marketing officer Tim Yates said that although some channels will be broadcast as live others will be dedicated made-for-mobile channels featuring regularly updated blocks of programming.

Some channels like Sky Sports News will be streamed live in real time said Yates. However there will also be some made-for-mobile stuff that will be looped for a period and then replaced. For example the two MTV channels will feature bite-sized versions of popular MTV shows like Dirty Sanchez and Cribs.

This Christmas is going to be the Vodafone live! 3G Christmas said Yates. We have 72 per cent 3G population coverage across the UK and we have a range of 16 3G handsets all of which are compatible with this service. We are putting some serious daylight on the competition.

Yates claimed the 5 tariff was very aggressive compared with competitor offerings and he confirmed Vodafone would be putting a significant marketing spend behind the proposition with TV advertising kicking off on November 22.

BSkyB chief operating officer Richard Freudenstein added: The service complements our existing pay-TV activities extends the reach of Sky content and delivers an additional stream of revenue.

Sky is giving all Vodafone live! 3G customers the chance to watch exclusive live coverage of the England cricket teams tour to Pakistan starting with the first Test in Multan on November 12.

A T-Mobile spokeswoman said this week: We can confirm that Elite Mobile has been appointed as our pre-pay distributor working on our boxed products and SIM-only.

The deal which comes on the heels of the distributor becoming a Vodafone pre-pay distributor in May was engineered by sales and marketing director Barry Nash who joined Elite six months ago.

Although Elites background strength is in accessories and handsets Nashs remit is to develop new routes to market.

In May we won a contract with Vodafone to provide its pre-pay handsets into our conventional channels and new routes to market he said. One of those routes is the non-traditional retail channel – retailers where mobile is not the main part of their business but an incremental revenue stream.

It was my goal to grow the business in terms of those opportunities. Once we had Vodafone on board I felt confident we were doing a good job in delivering to those channels.

Nash added that timing was key in approaching other operators.

The timing was right to approach T-Mobile. Going forward we will be keen to approach other operators as well.

Sony Ericsson UK and Ireland marketing manager Richard Dorman said: Any forecasting of products is done months in advance in conjunction with operators retailers and distributors. Q4 is always the busiest time of the year and everybody believes they can now sell more flagship handsets. We are continually delivering products into the market and aim to keep up with demand.

Many independent dealers said they had never stocked a Sony Ericsson W800i since its launch in August and could not count on stocking it in time for Christmas. They also said they had difficulty getting hold of the Sony Ericsson K750i and the Samsung D600.

Phone Dealer Forum founder Jez Harris said: I havent had any since launch. I cant get hold of the K750i either. The official line from Hugh Symons is that it is awaiting allocation from Orange.

Fone Doctor co-owner Faisal Sheikh said: I did have a couple on T-Mobile but havent had any for some time. Its been a nightmare to get hold of Sony Ericsson stock. Ive found it difficult to get hold of the K750i the P910 and the Samsung D600. The distributors are saying theres not enough to go around.

One Manchester dealer said: I have phoned every day to find out when it would be available on Orange and no one seems to know. I had one delivered in mid-September and that was it. The K750i is also hard to come by as is the Samsung D600. Its a joke.

RIM has taken a 15-year lease on a 69000 sq foot building on the Slough Trading Estate with options on more space to accommodate expansion.

A quarter of our business is from outside north America so this is about strengthening our European operation said Charmaine Eggberry European vice-president of RIMs enterprise business.

The bulk of RIMs 325 UK employees will relocate to the new site. However Eggberry was unable to confirm whether its other UK sites two in Egham and one in Birmingham would remain open.

Even though BlackBerry is embroiled in a legal dispute in the US Eggberry said the move proved it was business as usual in the UK.

Retailers dont have any reason ton be concerned. The fact that we have taken out a 15-year lease on such a large building shows how confident we are she said.

The research houses regular TelecomTrak survey found that network stores such as Vodafone Orange O2 and T-Mobile have risen to a 37.3 per cent share of the contract market. Mobile specialist stores such as The Link and The Carphone Warehouse has fallen over the past 12 months from 41.1 per cent 37 per cent.

TNS TelecomTrak director Paul Moore said: In a nearly saturated market it is essential for networks to retain customers especially high spenders who will take advantage of the latest download MMS and 3G service offerings. Customers who shop via network stores spend more on their mobile phones.

The network is piloting the QuickPhone kiosk the first vending machine in the UK to dispense mobile phones at its two Manchester retail stores.

The machine is designed for those who know what they want from a simple Pay As You Talk phone from 30 to a SIM pack costing 5. It will offer a choice of three phones.

It is the first vending machine to use chip and pin technology in addition to allowing customers to pay in cash. Phones will change monthly.

Emblaze CEO Laurence Alexander said that the Sting 6 clamshell phone which will be exclusive to Virgin Mobile is the first of several exclusive co-branding deals with UK network operators.

We have been working with several operators on phones for different segments of the market said Alexander. We will announce them in due course.

An Emblaze spokesperson added: A lot of devices are going through the approval process with UK network operators but the Sting 6 will probably be the only Emblaze device that reaches the UK market in time for Christmas.

Alexander said that the number of staff at its London offices had risen to 20 in recent weeks and that its global headcount which includes staff at a new R&D plant in Korea had reached 400.

We have taken a lot more sales and marketing staff at our offices in London. We have recruited from Orange and O2 as well as from companies within the fashion industry he said.

The Sting 6 features a 1.3 megapixel camera and will be priced at less than 80. Alexander said it was targeted at 16- to 24-year-olds the same demographic that Virgin Mobile appeals to.

It is a high-end cameraphone that is affordable to 16- to 24-year-olds. Virgin Mobile is a great brand and this device hits its sweet spot perfectly said Alexander.

The Sting 6 will be sold exclusively through Virgin Mobiles direct retail channels and Dixons Stores.

Virgin Mobile sales and marketing director Graeme Hutchinson said: Emblazes attitude and outlook is akin to our own.

Emblaze Mobile CEO Laurence Alexander said: We have held discussions with European Telecom about helping us in the distribution channel into continental Europe. We are in talks with other distributors in other markets as well. We already have a distribution deal for the UK with 20:20 Logistics and that is exclusive.

European Telecom managing director John Drinkwater said: The conversation we have had with Emblaze is about supporting it on the continent. I cant say more than that because the deal hasnt been finalised.

Both Alexander and Drinkwater denied reports last week that Emblaze was about to acquire European Telecom.

I am deeply upset and frustrated at these reports said Alexander. 20: 20 has an exclusive deal with distribution to the UK market. We will always consider merger and acquisition activity but talks with European Telecom have had nothing to do with any acquisition.

Drinkwater said: People have put two and two together and made five. Of course the members of our board are businessmen and would consider offers if they valued the business at the right price. If someone valued the business at 200 million then the offer would have to be looked at.

It is inevitable considering the climate he said. People would prefer to take a fully subsidised handset on a monthly subscription than pay 60 or 70 up front for a pre-pay handset. Logically the macro-economic impact on pre-pay is greater than it is on contract.

Taylor said that pre-pay had boomed in Q2 last year after 3 launched its pre-pay proposition so it was inevitable that there would be a slowdown this year. But he added that the pre-pay results were very acceptable and that the chain had done pretty well in a difficult retail environment.

Taylor said that the same retail slowdown had affected SIM-free sales down two per cent to 0.18 million for the quarter.

The contract market retained its buoyancy in the quarter said Taylor because consumers were happy to commit to contracts. Handset design and supply were also good.

Carphone Warehouse subscription connections grew 20.6 per cent to 0.83 million. Connections overall rose 15.1 per cent to 1.78 million.

Why pay 129 for a handset when you can get it for free on contract with a good tariff? he said. 10 per month in the future seems better than forking out up front. l The Carphone Warehouse has ordered the entire European stock of several hundred thousand of the latest pink Motorola V3 RAZR to cater to the female market in the run-up to Christmas according to CEO Charles Dunstone.

See Business Watch page 16