BT snaps up EE for £12.5bn

The UK's mobile industry is in the middle of a period of upheaval with its second mega-acquisition of the year.
Written by Jo Best, Contributor

BT has agreed to purchase EE for £12.5bn, the company announced on Thursday.

EE, jointly owned by Deutsche Telekom and Orange, has 31 million customers. While that figure includes 83,000 broadband users, it's EE's millions of mobile customers that have caught BT's eye. By combining EE with its own network, BT will be able to offer true quad-play services - bundled subscriptions of broadband, mobile, pay TV, and landline - as well as standalone and converged fixed and mobile services.

BT is hoping the merged company will help it steal a larger slice of the business market, which is "an area where demand for converged services is really developed," BT CEO Gavin Pattinson told analysts today.

BT will pay for EE using a mix of shares and cash. Once the deal closes, Orange will be left with a four percent share in BT and Deutsche Telekom with a 12 percent share.

"This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UK's leading 4G network will now dovetail with the UK's biggest fibre network, helping to create the leading converged communications provider in the UK," Pattinson said.

BT reckons it will get £1.6bn of "revenue synergies" from the deal - that is, selling mobile contracts to its broadband customers, and broadband deals to EE's mobile users. It's also banking on making £360m of savings annually in the fourth year after the deal closes, by cutting duplicated operating costs, presumably such as back-office staff and office space.

News that BT was shopping around for a mobile arm broke late last year: as well as confirming it was in talks over a potential acquisition of EE, the telco said it has also been discussing buying rival mobile network O2 from its Spanish parent Telefonica. Since then, fellow UK mobile carrier Three has agreed to buy O2 for £10.25bn.

The deal is expected to close before the end of BT's 2015/16 financial year - that is, around next March - subject to the usual approvals from local and European competition regulators.

Should the deal go through as expected, it wouldn't be the first time BT has had a mobile arm. It spun off its mobile unit, then known as BT Cellnet, in 2001. It was later rebranded as mmO2, and in 2005, it was bought by Telefonica, which changed its name once again to O2. In March last year, BT also struck an MVNO agreement with EE to resell its mobile services.

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