BT edges closer to acquiring EE as exclusive negotiations take place
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?