The mobile megamerger: good for Britain, good for Europe

At the end of a year of mammoth takeovers, Vodafone AirTouch's hostile bid for Germany's Mannesmann is turning into the most important.

The deal - valued somewhere between £77bn and £82bn, depending on Vodafone's ever-fluctuating share price - has rightly hogged the headlines because of its size, Vodafone's audacity and the fact that it comes on the verge of a mobile data revolution.

But it's key for another reason. In a given market, the price users pay and the way they are treated often depends on who controls the supplier and where they are from.

The UK, the base from which Vodafone has become the worldwide mobile network leader, expanding into Asia, Africa, Europe, and most significantly - through AirTouch - the US, is an interesting example.

The UK has been one of the most open markets to takeovers from overseas firms (in finance, telecoms, utilities, autos, general manufacturing and elsewhere), and has become the European hub for many an American or Asian multinational.

Looking at takeovers, the argument goes that in the age of multinational capital it doesn't matter where the owners of a company are based, only that they employ your country's workers. Swiss financial and pharmaceutical giants have long had more of their operations away from their home turf, and that hasn't been seen as a problem.

But in many industries, location does matter. When politicians go on about 'Rip Off Britain', they simply fail to grasp that some goods are more expensive in the UK because they are imported.

Think Levis, cars and other hardware, but also consider computer software - how often do we see a UK version of an operating system or application priced according to a 1:1, pound for dollars ratio, apparently for no reason?

And if you've ever tried to buy Body Shop goods outside the UK, you'll quickly see the equation applies the other way too.

So, Vodafone and Mannesmann. Vodafone chief executive, Chris Gent, has painted a picture of the mobile market in Europe being controlled by five giants a few years from now. He says BT, Deutsche Telekom and France Telecom are sure to be three of those five, and without a merger, Vodafone or Mannesmann may not stand a chance.

Maybe there'll be more than five, but the point is that it would be good for UK users to have two of those companies shaping the industry based in the UK.

Despite what the EC commissioner, Erkki Liikanen, has said, a record-breaking merger is unlikely to hurt competition in Europe, but will give Vodafone and Mannesmann a better chance to compete globally, as a single player.

Size won't just mean juicier profits for the group, but will ensure better deals with suppliers, which can be passed on to users. Straightforward global roaming - an important feature for some business users - should also become easier.

The UK will benefit from the merger because the company may be UK-based (i.e. UK users won't have to pay the expense of 'importing' mobile services), and all European users will benefit from the merged outfit's economies of scale.

This deal should be encouraged as good for the UK, good for Europe and good for the users of mobile services. But then as the British and German political premiers have learnt, approval is really a decision for the shareholders.