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£12.5 billion deal for acquisition of EE by BT agreed
Thursday 05 February 2015 09:29:45 by Andrew Ferguson

The acquisition of EE by BT will be interesting both in terms of how the 24.5m million EE mobile customers behave and what synergies arise from the acquisition. Definitive terms have been agreed on the £12.5 billion deal, with Orange gaining a 4% stake in BT and Deutsche Telekom a 12% stake and a place on the board of BT Directors as a non-executive.

The 834,000 EE fixed line broadband customers give BT some 8.4 million fixed line broadband customers. The exciting part will be what interesting products will arise from the merger, for example EE 4G has been running rural broadband trials, with the scale of BT behind them these trials might expand into full products and maybe even usage allowances that can cope with people watching whole TV series in a weekend.

Without a doubt a lot of pressure will be brought onto various UK and EU regulators over this deal, and some are already calling for a resale of some of the mobile spectrum that EE/BT hold. At the mobile network level, since BT do not run a large mobile operation that part of the deal is likely to be no problem, the purchase of O2 by Three will have more hurdles. Where the EE/BT deal will face investigation is more likely to be in broadband dominance and backhaul networks, this deal places something like 95% of partially unbundled SMPF broadband connections in the BT Group, which means the smaller providers when fighting changes in SMPF pricing will have lost the voice of EE. Fully unbundled services from Sky and TalkTalk are a very close match in terms of numbers to the size of BT now.

Vodafone is apparently poised to re-enter the fixed line broadband market, but with the main competition at 8.4 million, 5.4 million, 4.5 million and 4.3 million customers there is a very steep hill to climb to become a large operator. The C&W LLU network will help, but there is plenty of scope for acquisitions and further consolidation in the smaller provider area to ensure rapid growth. A unique selling aspect that is possible but unlikely is for Vodafone to rock the boat and go down the FTTH/FTTB route while exploiting Openreach fibre products in the short term.


Posted by kijoma about 1 year ago
see it was well worth giving them the ~£2Bn benefit cheque . They would of struggled without it.. :D
Posted by rtho782 about 1 year ago
Giving BT money via BDUK was not about them not being able to build FTTC without it. The money they have spent on EE, could have come close to paying for FTTP.

But, they wouldn't have, because without BDUK, they wouldn't have made a profit, so why should they?
Posted by Gadget about 1 year ago
£12.5b is the value of the deal not the amount of cash changing hands
Posted by taras about 1 year ago
This could be against the UK consumer's interest. Openreach and maybe T-mobile should be spun off of BT if the deal goes ahead.

Maybe selling plusnet needs to be done, Grabbing PN and now EE broadband customers leaves very very little choice for the consumer same for the mobile side too.

Quad play services aren't great to the consumer who maybe wants to spend £10 to £25 p/m
Posted by gah789 about 1 year ago
Don't assume that this will get regulatory clearance on the current terms. There are precedents in competition law for challenging the takeover or requiring significant disposals to strengthen competition. Limiting competition between 4G and fixed line broadband is an obvious concern.
Posted by TheEulerID about 1 year ago

EE's share of the fixed line broadband market is only 3% and would take BT's share to 34%. There would still be 4 major operators. What the takeover of a mobile operator has with OR, I have difficulty understanding. Mobile will still have 4 major operators (the O2/Three merger is the important one).
Posted by kijoma about 1 year ago
hmm @rtho782 "because without BDUK, they wouldn't have made a profit" . I think you find genuine businesses invest money and have a Return on Investment period , during this time it isn't profitable, afterwards it is.

Wouldn't it be great if all businesses had their up front investment paid for out of the public purse so they are profitable from day 1 ?

The Sports rights and EE purchases do not reveal any cashflow problems, as long as you ignore the pension deficit..
Posted by zyborg47 about 1 year ago
Well done taras, at least someone who realises that not all of us want quad play and that some of us just want a normal internet connection. I also agree with taras, that this deal will not be good for us the consumer, less choice once again. I really hope it will be stopped, but money talks.
Posted by Gadget about 1 year ago
@Kijoma - the gap fund principle as applied to state aid only allows enough "up-front" investment to bring the business case to the same level of criteria as commercial.... ie same payback period.
Posted by WWWombat about 1 year ago
Payback period being 12-15 years.
Posted by WWWombat about 1 year ago
Hard to deny BT a seat at the mobile table, when they used to have one.

Equally hard to say that an incumbent fixed line operator should not be active in the mobile market, per se, when both France Telecom and Deutsche Telekom are active & largest in their own markets.

Bit of a price drop though. France Telecom bought Orange off Vodafone for near €40bn.

Openreach is entirely untouched by the deal, so I don't see a way for the regulator to order divestment.
Posted by taras about 1 year ago
point is wombat is that with this deal, BT would control the market top to bottom, from network, to retail, mobile and tv. That is too much power.

The lack of other companies involved in BDUK contacts shows how much power BT now exerts in the telcomms arena. That is not good for the customer (b2b or b2c)
Posted by WWWombat about 1 year ago
A deal for EE doesn't change anything about how much of the fixed market BT has.

Which, incidentally, is less control "top to bottom" than Virgin, less TV than either Virgin or Sky, and less of the fixed market than when they owned Cellnet. Back then, Cellnet even had a bigger market share of subscribers than EE has today.
Posted by otester about 1 year ago
Hopefully BT can make the market competitive again, better than the status quo either way.
Posted by CaptainHulaHoop about 1 year ago
if they forced a break up and made openreach go stand alone could they afford to invest in new tech such as
Posted by andrew (Favicon staff member) about 1 year ago
The reasoning some have expressed means no need for Openreach to invest then, as the other commercial operators will then be able to roll-out FTTH in their millions.
Posted by michaels_perry about 1 year ago
Hope this will mean an improvement in our 2G mobile reception. It's poor on the outskirts of Trowbridge and was just as poor in the hamlet we used to live in. Trowbridge is not exactly a 'rural backwater' as it's the County Town of Wiltshire. We do get good Infinity 1 though, far better than the dead slow ADSL Max in the hamlet.
Wonder what benefits we'll see as we're on Orange for mobiles and BT Infinity. Wait and see I suppose.
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