£12.5 billion deal for acquisition of EE by BT agreed
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.