BT Group has entered “exclusive negotiations” with wireless operator EE, in what could be one of the biggest wireless acquisitions ever in the UK.
BT will pay £12.5 billion for EE, split between the two owners Deutsche Telekom and Orange. To acquire EE BT has offered Deutsche Telekom a 12 per cent share in BT, Orange will take four per cent.
Acquiring EE will allow BT to sell its quad-play of services; broadband, landline, TV and mobile, in one package. Deutsche Telekom’s CFO, Thomas Dannenfeldt said: “We firmly believe that convergence is the future of telecommunications in Europe. Customers want fixed-mobile converged services from a single provider.”
The acquisition will bolster BT’s annual financials, with £6.5 billion in additional revenue from EE. It is unclear how much of the revenue translates into annual profit; bear in mind EE has been investing a lot into marketing, 4G spectrum and fiber optic lines over the past four years.
EE and O2 were both on the cards for BT, but the broadband provider went with the number one option. EE currently has 24.5 million customers, six million on a 4G contract, and has the largest 4G spectrum in the UK.
O2 used to be part of the BT Group, but was sold to Spanish telecommunications group Telefonica in 2005 for £17.7 billion. BT reportedly felt uneasy with Telefonica having a 20 per cent share in the company.
It is unclear how BT plans to pay for EE, as BT currently has one of the largest pension deficits in the FTSE 100. BT also needs to manage financials for the upcoming Premier League licensing sales, set to cost Virgin, Sky and BT millions of pounds.
[16:11:22] Nathan chai: It appears the acquisition has started some kind-of mobile arms race with telecoms companies searching out allies. Three UK’s parent Hutchison Whampoa and Sky are both interested in a deal with O2, and reports claim Virgin Media’s parent Liberty Global is in early talks with Vodafone.
It is unlikely BT will manage to secure the deal any time soon. Sky and Virgin Media are both preparing to take BT to court over anti-competitive charges. Having control of the largest broadband and wireless service might be seen as too much for the UK government.