A Guide to BT’s Purchase of EE

A Guide to BT’s Purchase of EE

For those of us that spend our time thinking about the UK's telecommunications markets, these are interesting times indeed. With Three trying to complete the purchase of O2, Virgin contemplating a move into pay TV and BT purchasing EE, it's a very busy time to be paying attention. It's that last deal, however, that's causing one of the biggest stirs. It concerns the UK's largest media company, who offer TV, home phone and broadband, alongside being tasked with maintaining the UK's broadband infrastructure. Oh, and did we mention that they're trying to take over the largest mobile network in the UK?

Needless to say, it's a huge deal, and you're bound to have some questions, so let's dig in to the detail.

When did talks start?

Rumors that BT were in the market for a mobile network came to light on the 24th of November, 2014 when it was reported that BT were in talks with both EE and O2. The latter would have been interesting because O2 is a former BT company, which was sold to Telefonica in 2005. Neverheless, BT announced on the 15th of December 2014 that it had entered into exclusive talks to buy EE.

How much will it cost?

The deal will cost a reported £ 12.5 billion to BT in cash, but there's also a significant amount of stock being included in the deal. As part of the deal, Deutsche Telekom (who own 50% of EE and were basically trading as T-Mobile) will receive a remarkable 12% share in BT, while Orange has opted for a 4% stake in BT and a mostly cash settlement .

Will it go through?

Upon its announcement, there were fears that the deal would never see the light of day. The UK benefits from strong regulatory bodies which oversee competition within the country. As such, many suspected that the transaction would not be gone through on the grounds that it would create a monopoly for BT. However, Ofcom and their European counterparts both brave the deal the go ahead.

Will not it affect competition?

At the moment, it would appear that it will not make any major difference to competition in the telecommunications market. Ofcom believe that it takes at least four mobile networks to be on the high street for competition to be kept up, and this deal would not affect that. BT-EE, Vodafone, O2 and Three would still be on the high street, and so competition would remain. That was the only major issue that had to be addressed, and the regulatory bodies are satisfied that it's been issues.

What will it mean for EE customers?

For the time being, not much. When the deal does go through, EE customers should not notice much of a difference at all. EE will still continue to be separately maintained, although it will shed some management staff during the integration with BT. In the medium to long term though, it's unclear what will happen with the EE branding. The company already recently underwent a rebrand as it moved from being Orange and T-Mobile into a single entity, so BT might feel unwilling to test the patience of the public once again.

When will it happen?

With the regulatory bodies now signed off on the deal and a price stuck between the two companies, it's only a matter of time. There's a lot of due diligence yet to complete but these are two very big companies with expensive, talented lawyers. We'd expect the deal to go ahead by early 2016.

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