BT in exclusive talks over acquisition of EE mobile network

BT has entered into exclusive talks over the potential acquisition of the EE mobile network.

BT has entered into exclusive talks over the potential acquisition of the EE mobile network. - Credit: PA

Telecoms giant BT disclosed last night that it has begun exclusive talks with Deutsche Telekom and Orange over the possible £12.5billion acquisition of their UK mobile business, EE.

BT, which is seeking to develop a “quad play” offer by adding a mobile business to its landline, broadband and TV products, announced last month that it was in preliminary talks with the owners of two different networks.

One of them was identified by BT as O2, now owned by Telefonica but originally part of BT – where it known as BT Cellnet – until being spun-off as a separate company in 2001.

The other potential target was not identified by BT until yesterday’s statement, which was issued as the London stock market closed for the day, although EE had been widely reported to be the second candidate.

BT, which employs more than 3,000 people at Adastral Park, its research centre at Martlesham Heath, near Ipswich, said the period of exclusivity would last for “several weeks”, allowing time negotiate an agreement and to complete due diligence checks.

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“The proposed acquisition would enable BT to accelerate its existing mobility strategy whereby customers will benefit from innovative, seamless services that combine the power of fibre broadband, wi-fi and 4G,” the group said in its statement.

“BT would own the UK’s most advanced 4G network, giving it greater control in terms of future investment and product innovation.”

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The proposed £12.5bn price, which is not year binding, would involve a combination of cash and new shares in BT. Deutsche Telekom would hold a 12% stake in BT, and be entitled to appoint a member of the BT board, while Orange would hold a 4% stake.

BT said it expected the deal to achieve “significant” efficiencies, including cost savings through consolidation and improved sales of BT fixed-line services to EE customers.

The group took its first big step back into the mobile phone market in July as it launched a new business service aimed at delivering fixed line and mobile calls to the same handset, and it is also planning to launch a mobile phone business for the wider public by the end of its current financial year to the end of March.

BT said yesterday that it remained confident of delivering on these plans should no deal for EE be agreed. “A further announcement will be made as and when appropriate,” it added.

Paolo Pescatore, a communications analyst at CCS Insight, said EE was a more desirable asset for BT than O2.

He said: “EE has a more developed 4G network and has more mobile subscribers than any other UK operator. This offers a significant and highly attractive target market for BT to cross-sell fixed-line services to.

“More importantly however, it removes a converged rival from the market. Given that EE had multi-play aspirations of its own, BT will now face one fewer competitor.”

However, he warned a deal with EE could be trickier and more time-consuming than with O2.

He added: “The deal will be subject to more stringent regulatory hurdles than buying O2. It combines the UK market-leader in fixed-line with the number one mobile operator. We believe it is unlikely that Ofcom would block the deal, but the combined entity could be forced to dispose of some spectrum.”

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