BT has announced that it will acquire EE for £12.5bn in a move that will radically shake up the UK mobile market. BT touted the fact that the deal will give it the biggest 4G network in the UK, to complement its existing fibre network.
The extent and quality of EE’s 4G network was a major factor in choosing EE, V3 understands, as well as the fact the company have already done business together, as BT had been using EE’s network for its mobile virtual network operator deal.
BT also hopes that the deal will enable it to create a complete network for its customers so they are using its services, whether at home on fixed connections or on the go using the mobile services, or its existing WiFi services.
As part of any acquisition BT also picks up the 24.5 million customers currently on the EE network.
The deal will also give BT the chance to become a quad-play firm, offering telephone, mobile phone, broadband and mobile services in one bundle.
BT also said that the deal will provide many benefits for the company, and could allow significant cost savings through network and IT rationalisation as well as in areas of procurement, marketing and sales costs.
BT had been expected to make a decision on O2 or EE after confirming earlier this month that it was in talks to acquire one of the two companies.
The decision not to go with O2 will be a blow to Telefónica. The Spanish operator had seen a potential sale as a good way to shed the business unit in the UK, which the company was known to be hoping to sell.
BT will now enter a period of due diligence for "several weeks" before a final agreement on the acquisition is reached.
If approved the deal will mean Deutsche Telekom as a 12 percent share in BT and a seat on the company's board. Orange will take just a four percent share and will not have a seat on the board.
The chairman of EE’s board of directors and chief financial office of Deutsche Telekom, Thomas Dannenfeldt, said the deal was a great way for the company to retain a UK presence as the market evolves.
“The proposed transaction with BT offers the chance to further develop our superbly positioned mobile business engagement in the UK and to take part in the outstanding opportunities of an integrated business model," he said.
Paolo Pescatore, director of multiplay and media at analyst house CCS Insight, said the decision to try and purchase EE over O2 made sense for BT, but it still faced numerous hurdles before the deal would be completed.
“We see the deal as more complicated and time-consuming and thus consider it as a more risky option," he said.
"In particuar, the deal will be subject to more stringent regulatory hurdles than buying O2. It combines the UK market-leader in fixed-line with the number one mobile operator.
"We believe it is unlikely that Ofcom would block the deal, but the combined entity could be forced to dispose of some spectrum. The regulator could also mandate the demerger of either of both of BT’s Openreach and Wholesale units.”
Pescatore also noted that given EE is owned by French and German parent companies, that have not always agreed on the best strategy for EE, there was no guarentee the agreement currently in place would last.
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