Vodafone (NYSE: VOD) is mulling over a bid for T-Mobile UK, a move that would catapult them to the lead of the British mobile phone market, one of the most competitive markets in Europe. The FT.com, citing “people familiar with the situation” said that Vodafone, the world’s largest carrier by revenues, was looking at either making an offer or setting up a joint venture with T-Mobile UK, which has an enterprise value of €3bn-€4bn ($4.2bn-$5.6bn).

Such a bid could be blocked by regulators, as a tie-up between the two carriers would give Vodafone a 40 percent market share in Britain. At present, Telefonica’s O2 is the market leader, with a share of 27 percent. Vodafone has 25 percent, France Telecom’s Orange has 22 percent, T-Mobile has 15 percent, and Hutchison Whampoa’s 3 has 8 percent. UK carriers have long complained of their painfully thin margins in the British market, where five of them are competing to serve a country with a population of nearly 61 million people. By comparison, AT&T (NYSE: T) Wireless’ entire subscriber base is now over 70 million.

The future of T-Mobile UK, the country’s fourth largest carrier, has been under question for several months now, with rumors flowing over its fate. In May, Deutsche Telekom (NYSE: DT) wrote down €1.8 billion euros ($2.4 billion) on the struggling unit, with reports surfacing that DT’s largest shareholders, the German government and private equity group Blackstone were eager to dump it. Though DT recently installed Richard Moat as the unit’s new CEO and has said that it plans to give him a chance to turn the business around, it has also appointed JP Morgan to advise on options for the business.

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