BT raised the prospect of cheaper deals for customers yesterday as it announced that it had agreed terms for a £12.5 billion takeover of EE, the UK’s biggest mobile operator.
The telecoms giant will swallow up the firm in a cash and shares deal that it hopes to complete by the end of the summer should regulators give the all-clear to create what BT describes as the UK’s leading telecommunications provider.
It will enable BT to sell its fixed telephone, broadband and television services to EE’s customers, and accelerate its plans to offer seamless convergence between fixed wifi and high-speed fibre networks with mobile 4G technology.
Chief executive Gavin Patterson hailed the deal as a “major milestone”, adding: “This is a very exciting time and a new chapter for BT.”
It marks BT’s re-entry into the mobile phone market for the first time since spinning off its BT Cellnet operation in 2001.
The group had announced in December that it was in exclusive talks to buy EE, which has 24.5 million direct mobile customers, as it spurned the possibility of regaining control of its old business, now known as O2. Mr Patterson appeared to signal cheaper deals for customers as yesterday’s move was announced, saying that some savings from “simplifying the network” would be passed on.
He said: “If you look across the continent, prices have come down to some extent when fixed and mobile products are sold as a bundle.”
The deal comes as the telecoms sector is convulsed by a round of consolidation as rivals shore up their positions.
Three owner Hutchison Whampoa is in talks to buy rival O2 for £10bn from Spain’s Telefonica – which would create a new mobile market leader – while Sky has announced plans for its own mobile offering using O2’s network.
Analysts at Edison Investment Research said the telecoms landscape had been transformed but added that whether this was good for consumers was “a very different question” as bundling products together would make it harder to compare prices.
The EE transaction will be partly financed by a £1bn share issue while EE’s current owners Deutsche Telekom and Orange will hold stakes of 12 per cent and 4 per cent respectively in BT.
Deutsche Telekom will be entitled to a seat on the board. Chief executive Tim Hottges said the deal laid the foundations for the companies “to be able to work together in the future”.
BT said it expected eventually to achieve combined operating cost and spending “synergies” of around £360 million. Shares rose by 5 per cent.
Mr Patterson 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.”
BT said the transaction was subject to approval from shareholders and clearance from the Competition and Markets Authority (CMA).
It is expected to be completed before the end of the financial year to March 2016. If it clears CMA scrutiny at the first hurdle, the deal should be finalised by the end of the summer.