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BT edges closer to acquiring EE as exclusive negotiations take place
Monday 15 December 2014 18:56:06 by Andrew Ferguson

While the sale of EE to BT Group plc is far from a done deal, the news that exclusive negotiations between EE and BT are now underway with a purchase price of £12.5bn on the table (made up of a combination of cash and new BT ordinary shares).

EE has some 24.5 million mobile customers and a much smaller fixed line broadband base of just over 700,000, so the deal is really about acquiring the mobile customer base and the corresponding access to a mobile network. If the deal does go through in the format currently proposed Deutsche Telekom would end up with a 12% stake in BT and entitled to one member on the BT Board of Directors, Orange would hold a 4% stake in BT.

So while the sale is mainly about converged fixed and mobile and vastly increasing the BT penetration into the mobile sector once more, there is various interesting aspects. Such as what will BT do with the 700,000 EE ADSL/FTTC customers, move them to PlusNet? Will EE continue to exist as a name, or could we see a total rebrand.

EE has the most established 4G network in the UK, but may have been watching the cost of increasing the bandwidth available at masts as people start to use speeds available more and knew that without serious backhaul investment the continued push of 4G would be costly. On the other flipside of the coin BT placing a side-bet on mobile is insurance against the 'renters' market embracing mobile broadband and giving up on fixed line services.

So the sale is far from certain, and there will be a raft of regulation to be looked into and politicians questioning whether the BDUK monies have made this sort of purchase easier. The spending on BT Sport and sports rights is already upsetting some quarters, with questions over how BT can afford this after coming around with cap in hand to expand its fibre based broadband roll-outs beyond two thirds of UK households. This may also be part of a wider move for incumbent Telco's across Europe to create partnerships crossing the technology and physical borders.

If EE does go to BT, who will be interested in O2?

Comments

Posted by connormill about 1 year ago
"If EE does go to BT, who will be interested in O2?"

Sky? When i worked for then about 3 years ago there was constant rumors of them buying a mobile operator and going full quad play.

If any firm could do a really successful quad play it's sky

Virgin - Only an MVNO and not enough TV customers
BT - Way behind in TV Game
TalkTalk - Same as above

Sky with O2 would be 10m+ TV customers plus the second largest Mobile network.
Posted by generallee94 about 1 year ago
I would agree that Sky buying the rest of O2 would be a smart and probable move for sky to compete against Virgin Media.

Though IMO O2 suck for performance but I many still love the network.
Posted by csimon about 1 year ago
Saw you on the telly last night!
Posted by csimon about 1 year ago
BT's PR spin says that it will result in cheaper prices for customers. The only way this will happen is by bundling, i.e. now a quadplay bundle which would be more expensive if getting the services separately from different providers thereby dissuading people from switching to get better packages for one of the bundled services. Bundling is anti-competitive and Ofcom and/or CMA should prevent providers becoming becoming n-play and too big, thereby enabling practices like this.
Posted by otester about 1 year ago
Whoever gets O2 is going to need to do some major investing (which Telefonica have neglected for ages), unless it's BT, then perhaps they could stick mini-3G masts on each FTTC cabinet/exchange.
Posted by ValueforMoney about 1 year ago
Two possible upsides for rural. BDUK should not need to contribute to spines that will support its 4G masts, and the USC premiums should not be held but used to take fibre deeper.
Posted by connormill about 1 year ago
I do agree that O2 has by far the worst network, they have the least amount of 4G Spectrum.
With 4G and fast connection becoming more and more common and more important to consumers many may end up leaving O2 because of their poor network.
So that leaves them with 2 choices. Either invest and keep up or stand still and become a slower network aimed at the low end.
If they do choose to invest then they need a backer with deep pockets to fund that, enter Sky. It will take years of throwing money at it before they see any real investment, but it's possibly the only way to turn the network around.
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