BT buys EE for £12.5 billion

BT have bought EE, the largest mobile operator in the UK, in a deal worth £12.5 billion. The deal, made up of cash and shares, will make BT the principal communications supplier in Britain and is anticipated to make the company £360 million a year by the fourth year. The deal should be completed by March 2016 but Gavin Patterson, chief executive at BT, has said it could be done as early as summer 2015.

The deal will allow BT to sell broadband, pay-TV services and fixed line services to EE customers and will also benefit their long-term plan to create a faultless unification between high-speed fibre networks and Wi-Fi through mobile 4G technology platforms. BT have argued that this combination will lead to future investment and creativity around new products.

Gavin Patterson spoke of his excitement about the deal. He stated: ìThis is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UKís leading 4G network will now dovetail with the UKís biggest fibre network, helping them to create the leading converged communications provider in the UK.î

BT have had exclusive negotiations with the current owners of EE, Orange and Deutsche Telekom, who will now possess stakes in the company of 4% and 12% respectively. Further to this, Deutsche are authorized to occupy one seat on the board of the new company. The deal still needs the approval of the shareholders and also for the Competition and Markets Authority to sign off on it.

An analyst at Edison Investment Research, Dan Risdale, said about the deal: ìIn the space of a few months the UK telecoms landscape has changed enormously. As the majors fill in the gaps in their offerings, competition to offer multi-play bundles is going to step up significantly. Whether this will be beneficial for consumers is a very different question. The bundling of services make it much more difficult to compare pricing while more premium TV content is likely to move away from free to air.î

The deal marks the return of BT to the forefront of the mobile market. This is because it will be supplementing the pre-existing 10 million households that it already services for landline and internet with the 27 million that subscribe to EEís mobile services.

The deal has already been subject to some criticism from BTís competitors and is also being closely monitored by the regulator Ofcom as well as the Competition and Markets Authority. One of the biggest concerns is wholesale prices and ensuring that competitors will not suffer by BTís ability to direct data traffic.

The head of Vodafone, Vittorio Colao, stated: ìThere are four Davidsí and one Goliath. It [BT] will be more than double the size of the nearest competitor.î

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