BT has formally entered into an exclusivity arrangement with EE owners Deutsche Telekom and Orange in relation to a possible acquisition of the UK’s largest mobile network operator, rejecting a possible takeover of O2.
The agreement will last for a number of weeks to allow BT to complete due diligence and negotiate a final settlement.
The non-binding terms of the current agreement include a purchase price of £12.5bn on a debt/cash free basis, in a combination of both cash and ordinary shares that will see Deutsche Telekom take a 12% stake in BT and 4% in Orange.
Deutsche Telekom will also be entitled to appoint one member to the BT board of directors.
However, at the time it was assumed BT would buy O2 – the network that it formerly owned as BT Cellnet – which is currently owned by Spain’s Telefónica.
The acquisition of O2, now off the table, was seen by many as a more sensible deal for BT, with a sole owner known to be keen to sell, and a smaller overall footprint than EE.
Its decision to formally open talks with EE’s owners will – if a deal is agreed – see BT become the largest communications provider in the UK by a considerable margin.
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In a statement, BT said the acquisition would enable it to accelerate its existing mobility strategy and allow customers to “benefit from innovative, seamless services that combine the power of fibre broadband, Wi-Fi and 4G".
BT will continue to progress with its own plans for providing enhanced fixed-mobile converged services for business and customers. It said it remained confident of delivering on those plans, should the EE deal fall through.
The telecoms firm added that it expects significant savings through network and IT rationalisation, back-office consolidation, procurement, marketing and sales. Additionally, BT hopes to generate more revenue synergies through selling fixed line services to EE customers it does not currently touch.