The UK's supply of telecommunications operators with acronyms shorter than two letters is about to drop to three. In a widely anticipated consolidation move, BT and EE have come to terms.
BT has agreed to buy EE for £12.5B and return to the wireless market 13 years after spinning off O2. That price tag reflects a mutliple of 6-8x 2014 cash earnings, depending on what one includes and excludes. It will make DT a 12% owner of BT, and will put DT's Tim Höttges onto BT's board. Orange will also hold 4% of BT, but will take most of its payment in cash.
In one sense, the UK market isn't changing much at all since it will from 4 mobile carriers to 4 mobile carriers. But one of those mobile carriers will also be the wireline incumbent, and that changes the flavor substantially. Regulators probably won't stand in the way, but they will certainly be on alert - not that they weren't already riding close herd on BT's fiber and copper business already.
With Hutchison poised to buy O2 from Telefonica and merge it with it's own UK carrier, 3, the UK's telecom landscape is definitely experiencing a rapidly evolving situation. But in the short term, the story would be one of massive integration projects by BT, which plans to spend £600M over the next four years to achieve some £360M in annualized cost synergies.
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