BT - EE merger: Next stop...regulators

The terms have been agreed at breakneck speed. IDC's John Delaney explains what we can expect in the coming months.

Just seven weeks after BT announced its interest in buying EE, the two parties have agreed terms for the acquisition.

The deal, worth £12.5bn, will see Orange and Deutsche Telekom sell 100% of their shares. German-based Deutsche Telekom will have a 12% stake in BT and will gain a seat on the board. French telecoms provider Orange will walk away with a 4% stake, plus £3.4bn in cash.

And what will BT get for this considerable chunk of money? Only 24.5 million direct mobile subscribers and the fastest 4G network in the country.

"The combination of EE and BT will provide customers with innovative, seamless services that combine the power of fibre broadband with wi-fi and advanced mobile capabilities," BT said in a statement.

But hashing out the terms of the deal is only the start of what is likely to be a lengthy process. BT and EE are well aware that there will be a large degree of scrutiny from Ofcom, the UK Competition & Markets Authority and – judging by similar deals on the continent – the European Commission.

John Delaney, associate VP of Mobility at IDC, explained that the potential deal was unique from an anti-competition perspective.

“In one sense, it is less contentious from the competitive standpoint than the mergers that were approved in Germany, Ireland and Austria,” Delaney said. “BT does not currently own a mobile operator, and therefore the deal will not (by itself) result in fewer mobile operators competing in the UK.”

“Indeed, it could be plausibly argued that for business customers, a BT/EE merger would make the UK mobile market more competitive,” the VP continued. “EE has already been making some headway in gaining market share among businesses, by virtue of its lead in the rollout and uptake of 4G services. The combination of EE's 4G lead with BT's brand strength and existing relationships with business customers could produce a much stronger competitor for Vodafone, the current leader in the UK business market for mobile.”

Delaney said that the market structure as a whole would need to be considered carefully.

“[The merger] would combine the UK's biggest mobile operator (and the 4G market leader by a considerable margin) with the UK's biggest home broadband service provider, and an increasingly significant challenger to Sky's dominance in the pay TV market.”

Vodafone and TalkTalk are calling for the regulators to force a restructuring, which may see BT spin off its Openreach fixed line division.

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