National giants get close

BT agrees to $19B takeover of EE, paving way for close DT relationship

The negotiations are over: pending regulatory approval, BT will get back into the U.K.’s mobile scene in a big way by buying EE from Deutsche Telekom and Orange for £12.5 billion ($19 billion).

This means BT will be able to sell fully-converged bundles of fixed and mobile connectivity, telephony and pay TV services. It will also leave Germany’s Deutsche Telekom as BT’s biggest individual shareholder, and DT’s chief is already talking about the big European national telecoms giants working together more closely in the future.

“The UK’s leading 4G network will now dovetail with the U.K.’s biggest fiber network, helping to create the leading converged communications provider in the U.K.,” BT CEO Gavin Patterson said in a statement. “Consumers and businesses will benefit from new products and services as well as from increased investment and innovation.”

The companies began exclusive talks in December last year after BT said it was interested in buying either EE or O2. After BT and EE went exclusive, Three UK owner Hutchison Whampoa said it was in talks to buy Telefónica’s O2.

If both those deals go through, the U.K. will be left with three network-owning mobile operators, rather than four (the other one is Vodafone). Regulators will need to take this into account, along with the various chunks of spectrum that the companies own — despite only explicitly talking about business services at the time, BT bought 4G spectrum in 2013’s big auction.

It remains to be seen whether Europe’s competition regulators will take an interest, or whether it will be down to the UK Competition and Markets Authority.

EE is the U.K.’s largest mobile carrier, comprising as it does two former carriers, T-Mobile UK and Orange. It has 24.5 million direct mobile customers, 834,000 fixed broadband customers and a bunch more people who use EE mobile services resold under different virtual operator brands. In total, it services 31 million people, or roughly half the country.

The deal will be a cash-share combination, leaving Deutsche Telekom with a 12 percent stake in BT and one non-executive board member, and France’s Orange with a four percent stake.

“The transaction is much more than just the creation of the leading integrated fixed and mobile network operator in Europe’s second largest economy,” DT CEO Tim Höttges said in the statement. “We will be the largest individual shareholder in BT and are laying the foundations for our two companies to be able to work together in the future.”