BT Makes Its Wireless Choice: EE

December 16th, 2014 by · 1 Comment

The wireless market in the UK just may get its incumbent back. BT said yesterday that it has entered into 'exclusive talks' to by EE, the mobile operator jointly owned by Deutsche Telekom and Orange. While the process will take a few weeks, the apparent price tag is £12.5bn.

BT had been looking at both EE and O2, but seems to have opted for the larger and more complicated of the two. O2 would have been a reunion of sorts, given that BT spun it off over a decade ago prior to its purchase by Telefonica. But buying EE will launch it all the way to the top of the market, at least by revenue, and offer a larger pot of potential synergies.

In its current shape, DT and Orange would come out of the deal with approximately 12% and 4% stakes in BT, respectively. That would put 3 of the continent's largest telecommunications operators in the same UK basket, with Vodafone and Telefonica leading the rest of the pack. Just what UK regulators will think of all this is an open question. It doesn't directly reduce competition much perhaps, but it does tie the incumbent wireline infrastructure to a particular wireless network once again and that could, err, complicate the backhaul business.

But I rather doubt the competition will wait and see, there have already been rumors that Vodafone is looking at Liberty Global and Virgin Mobile, for example. Vodafone denied it of course but that rumor is almost guaranteed to resurface, and soon. Vodafone's purchase of C&W Worldwide a couple years ago gave them a substantial wireline asset and a bundle of synergies, but BT owning EE will push them to do more.

Yet perhaps what Vodafone might try is to throw a real monkey wrench into the whole UK consolidation thing and bid for O2, with which it already shares masts and such.  They probably would never get such an idea past regulators, but they might make it messy enough to stop the BT/EE idea along the way.

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Categories: ILECs, PTTs · Mergers and Acquisitions · Wireless

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