UK’s BT Agrees To Buy Mobile Carrier EE For $19B

Major consolidation moves are underway in the UK mobile market. As expected, UK carrier BT has agreed to buy mobile carrier EE for £12.5 billion ($19 billion). BT has been talking to EE since November 2014 but only confirmed that it was in talks to buy the mobile carrier, the largest in the UK, in December 2014.
EE’s existing shareholders, Orange and Deutsche Telekom, will sell all of their shares in the business to BT. After the deal is finalized Deutsche Telekom will hold a 12 percent stake in BT, while Orange will receive four percent.
BT will be raising about £1 billion in debt to help finance the deal.
BT was one of the first entrants into mobile in the U.K. with its BT Cellnet brand. It eventually spun out the business, rebranded as O2, and Spain’s Telefonica acquired it in 2005 for £18 billion. BT reportedly made an offer to buy O2 in November 2014 for about £6 billion.
Telefonica is now in discussions to sell off O2 in the UK to Hong Kong-based investment holding company Hutchison Whampoa, which owns UK’s Three.
By purchasing EE, BT now owns one of O2’s main rivals. While BT has dabbled with mobile in recent years, including launching a 4G mobile plan for SMBs last summer, the acquisition of EE marks its return to the space in a big way.

If Hutchison’s acquisition of O2 goes ahead, it will mean a collapsing of several large players into a smaller lineup. Vodafone, the carrier that has at times been the UK’s largest and will now recede further behind the others, has been out of the conversation so far but is almost certainly going to be raising some red flags with UK and European regulators about the acquisitions.
BT, however, said that during a conference call that EE is a complementary business and will not increase BT’s concentration in fixed line or mobile. BT expects the deal to close in the first half of 2016, pending approval by shareholders and the Competition And Markets Authority (CMA).
BT’s move on EE is an aggressive step towards offering so-called “quad-play” services. BT said that it plans to market its broadband, fixed line, and pay-TV services to EE customers. The mobile carrier currently has 31 million customers, of which 24.5 million are direct mobile customers with 834,000 on fixed broadband.
In its results for last year, EE reported that its 4G base grew 284 percent to 7.7 million, which it says makes it Europe’s largest 4G operator.
In its announcement, BT chief executive Gavin 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.”