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UK’s mobile market merges as BT acquires EE for £12.5bn

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The two companies entered private talks ahead of Christmas in mid-December, with BT granted an exclusive due diligence period of several weeks to weigh up the acquisition.

With February now underway, BT has accepted “definitive terms” to acquire EE for £12.5bn as the businesses plan to provide customers seamless digital support by combining their respective knowledge in broadband and mobile. Additionally, BT expects the move to generate more opportunity to invest and innovate with products in the future.

A breakdown of EE – which was launched through an Orange and Deutsche Telekom (T-Mobile) merger – shows  the firm now has 31m customers in the UK across mobile and broadband, with the largest 4G customer base of any European operator.

It’s a very interesting move and comes following Sky’s announcement on 29 January that it is entering the mobile market to deliver 2G, 3G and 4G services in partnership with Telefonica (O2) in 2016. Of course, BT was at odds whether to buy EE or O2, while the merger of UK’s mobile companies has seen further consolidation as the owner of Three UK is set to buy O2 for £10bn.

Gavin Patterson, CEO, BT, said: “This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UK’s leading 4G network will now dovetail with the UK’s biggest fibre network, helping to create the leading converged communications provider in the UK. Consumers and businesses will benefit from new products and services as well as from increased investment and innovation. 

“The deal provides an attractive opportunity for BT to generate considerable value for shareholders, with significant operating and capital investment efficiencies supported by our tried and tested cost transformation activities. The enlarged BT will offer significant opportunities for employees as we lead the creation of a world-class digital infrastructure for Britain.”

The £12.5bn will be payable as cash and BT shares, as Deutsch Telekom will secure 12 a per cent stake and a non-executive member on BT’s board, while Orange will gain a four per cent stake.

BT plans to provide a full range of communication services to both customer bases, including the sale of broadband, fixed lines and TV services to EE customers currently not signed up, also providing its consumer and business users with new services to generate a total net revenue synergy of £1.6bn.

Olaf Swantee, CEO, EE, said: “Joining BT represents an exciting next stage for our company, customers, and people. In the last few years alone, we have built the UK’s biggest, fastest and best 4G network, significantly advancing the digital communications infrastructure for people and businesses across Britain.

“Today’s announcement will ensure the UK remains at the forefront of the mobile revolution, bringing even more innovation and investment in world leading connectivity for our customers.”

Chris Averill, CEO of innovation consultancy We Are Experience, offered his opinion and said: “With BT confirming the purchase of EE, the sales spree for other players in the space can well and truly begin, we’ve already seen Three purchase O2 and these have the potential to impact both the telecoms market and the consumer in a big way. The shift could lead to an increase in free mobile tariffs, which is bound to be disruptive as the competition for customer loyalty is cranked up a notch.

“The shake-up is a catalyst for change and telecoms companies who can provide their customers with a more flexible service are going to thrive. Thanks to the amount of choice now available to the customer, and with endless ways of researching the best deal, people are less willing to pay more or tie themselves into a contract when they don’t have to. Companies need to tailor their packages to the individual and build customer loyalty by providing a quality user experience.”

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