Many national mobile markets have one large player with 40-50% (normally the major fixed line player and former monopoly), a second player with 20-30%, and one or two smaller players with much smaller shares than that. This large player normally takes advantage of its size and existing business relationships (and the scope of its network) and makes most of the money. The second player usually prices itself a little better than the biggest player (but not that aggressively) and makes cosy profits, and the smaller players compete on price but generally lose out because they lack the reach and resources to compete for the best customers.
Britain is not like this. When BT owned what became O2, they for various reasons failed to gain dominance the way Deutsche Telecom, France Telecom, and Telefonica did in their home markets, which led to the rise of Vodafone. The second round of players (Orange and (then) One2One) did much better than in most markets, and this led to a situation where four players had very similar market shares, at least in terms of the number of customers. (O2 and Vodafone's customers typically spend more so those two companies have higher revenues). Combined with a fifth player with deep pockets, this led to the British market being extremely competitive, which is good for customers but bad for operators.
Three of Britain's networks are owned by foreign former monopoly telcos that are used to being dominant in a situation as described above in their home markets. They find the British market much harder going than when they entered it. Deutsche Telecom has decided it has had enough, and decided to go home.
However, if another of the big three networks were to buy T-Mobile's assets, they would end up with a market share of around 45% of total customers. (By revenues, it would depend on which buyer). This is similar to the share dominant players have in other markets, and the buyer would see this as a chance to turn Britain into the same sort of quasi-oligopolistic market that exists elsewhere in Europe.
Yes, this would reduce competition and make things worse for customers, but the trouble is that Britain would still be more competitive than other European markets, and if they were to block this, European regulators would have to acknowledge that other European markets are not competitive. Acknowledging this would acknowledge that they are useless as regulators and/or that they would have to subsequently do something about other European markets. Which is why they will let any such merger happen.