CMA Approves BT’s Acquisition of EE

The provisional findings of an inquiry by the Competition and Markets Authority (CMA) into the proposed acquisition of 4G network EE have been positive, increasing the likelihood that the acquisition will go ahead.

BT to buy 4G network EE

An inquiry into the proposed merger was necessary for a number of reasons. While the two companies are both strong in the UK telecommunications market their individual strengths are in different areas. EE’s main business is mobile communications while BT is far stronger in fixed communications such as voice, broadband, and pay TV. With the prospect of a merger between the two, the CMA was obliged to investigate how this would impact competition for services to consumers which both companies currently provide.

A second reason an inquiry was essential was that BT currently provides fixed services to other communications providers. This includes providing backhaul services that connect radio masts to core networks for EE’s three main current competitors O2, Three, and Vodafone. The inquiry needed to find out how the proposed merger would affect BT’s incentive to continue to supply these services to these other mobile communications services on a wholesale basis.

Talking specifically about the mobile market in the UK, John Wotton, Chair of the inquiry said, “We provisionally think that the retail mobile market in the UK, with 4 main mobile providers and a substantial number of smaller operators, is competitive. As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect on competition. By the same token, it is unlikely that the merger will have a significant effect on competition in the retail broadband market, where EE is only a minor player.

Having considered all the evidence, the group does not provisionally believe that, in a dynamic and evolving sector, it is more likely than not that BT/EE will be able to use its position to damage competition or the interests of consumers.”

The inquiry looked at a number of different telecoms markets within the UK before publishing its initial findings. These included the supply of retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail fixed broadband services. The unanimous conclusion for all but one of these markets was that they are not likely to suffer from a substantial lessening of competition (SLC) as a result of the merger.  The only market still under consideration is the wholesale mobile market. As the group was evenly split as to whether a SLC would occur in this market as a result of the acquisition a conclusion has yet to be reached.

Following the publication of the provisional findings report, the inquiry will be considering responses. The final report will be published in mid-January 2016.

According to Olaf Swantee, CEO of EE, “EE welcomes the CMA’s provisional approval of our merger with BT. We now look forward to completing the deal quickly, and creating a new combined company designed to benefit both British consumers and businesses, while helping to propel the UK to the very front of global telecommunications.”