BT returns to mobile phones as it confirms £12.5 billion takeover of EE

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After weeks of exclusive talks, the two sides have confirmed the deal, which will add mobile to BT’s existing fixed-line phones, broadband and TV services.

Having the four elements makes BT a “quad play” provider, something most major telecom companies are chasing as they believe consumers will increasingly want to buy one package covering all four services, rather than sign up via a handful of different companies.

Sky recently signed a deal with O2 to provide mobile services to customers in 2016, while Vodafone said late last year it would launch UK broadband and TV services.


EE’s owners, Deutsche Telekom and Orange, were happy to offload the business, but each will retain a stake in the new combined business.

Deutsche Telekom gets 12% and a seat on the board, while Orange will receive a 4% stake and about £3.4 billion in cash.

Both companies are part-owned by their respective national governments, meaning the formerly state-owned BT will be part-owned by the German and French governments.

BT had made it clear that it wanted to re-enter the mobile phone market. It exited the industry with the spin-off of BT Cellnet, which later became O2, in 2001.

Merger talks started last year with BT holding initial talks with O2 before it switched its attentions to the operator’s larger rival, EE, and entered exclusive talks with its French and German owners at the end of last year.

BT is not expected to face significant regulatory investigations into the takeover, especially because its fibre optic and copper cable network, which carries mobile traffic for rivals, is already closely regulated by Ofcom.

There had previously been calls for Ofcom to intervene over the wholesale price BT charges rivals to access the lines, to avoid creating a market-dominant position.

Critics have argued that with BT allowed to charge any price to competitors – with the profits used to upgrade the network – it could win more customers by cutting prices too aggressively.

EE brings to the BT fold 24 million UK customers, the largest holding of spectrum used for mobile services, and the most developed 4G network in the country.

The deal will be funded with £6.3bn in shares in the combined group, and about £6.2bn in cash, expected to be raised through a rights issue.

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February 5, 2015 |
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