The telecoms landscape in the UK is set to alter dramatically now that telecoms group BT has paid £12.5 billion to buy the country’s first and largest 4G network, EE.
The takeover of EE will more than treble BT’s retail customers from 10 million to over 34 million. It will be even larger than it was before it sold its original mobile operation O2. BT are buying all the shares in EE that were previously held by Orange and Deutsche Telekom. Orange will receive a pay out of £3.4 billion, as well as a 4% share in the new combined business, and Deutsche Telekom will have a 12% share and a seat on the board. Since the news was announced BT shares have increased by 4.5% to reach a high not seen since 2001. BT intends to raise £1 billion through new shares to help fund the takeover.
BT said in a statement: “The combination of EE and BT will provide customers with innovative, seamless services that combine the power of fibre broadband with wi-fi and advanced mobile capabilities.”
Competition concerns from other networks
The merger of EE and BT may raise competition concerns, as it puts BT in a very dominant position in the UK market. Competitors such as Vodafone have already suggested that BT should be obliged to separate from its Openreach fixed line division which owns the nationwide fibre broadband network used by all the other mobile operators to carry voice calls and data.
The authorities that look into competition usually look at mobile and fixed line markets separately, but this is likely to change as more mergers are resulting in bundled services and a multi-play market. While the UK Competition and Markets Authority is likely to have the final say, European regulators may also be involved.
Further telecoms consolidation
BT isn’t the only group looking to fil the gaps in its service offering through acquisition, to enable it to offer multi-play bundles to its customers.
- Sky has announced the launch of its own mobile service through a deal with O2
- Vodafone is to offer broadband services this year and there is speculation it may merge with Virgin
- The owner of Three, Hutchison Whampoa, is in talks to buy O2
It is thought that BT’s move to buy EE is part of a wider plan to become a digital publisher rather than simply a network provider, following the rise of live TV streaming and video on demand services. With the acquisition of EE, BT will be able to distribute content via TV, desktop, and mobile, so customers can reach it wherever they happen to be.
According to Dan Ridsdale, analyst at Edison Investment Research, “In 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 makes it much more difficult to compare pricing, while more premium TV content is likely to move away from free to air.”