We reported a few weeks ago that BT, British Telecom, was in exclusive talks to acquire EE, currently the largest UK carrier that was formed from the merger of T-Mobile and Orange. Today, BT have announced that the deal has been agreed at the valuation of £12.5 billion, about $19 billion. They are now back in the mobile business, or least they will be once the deal has been completed, which the business optimistically states should happen by the end of the year. The deal must be inspected by both the UK Competition and Markets Authority, and the communications regulator Ofcom. These are going to be busy teams in the coming months with the Three, O2 deal, too.
In the official announcement, BT said that it intends to provide customers with “innovative, seamless services that combine the power of fibre broadband with Wi-Fi and advanced mobile capabilities.” Their new business strategy will be based around persuading existing EE customers to use their in-house home broadband and television services, and to sell EE’s 4G LTE network to existing BT home line and broadband users. In other words, BT needs EE customers to buy into its existing fixed line services and current BT customers to switch to the EE network at the next upgrade. This is very much “as expected,” BT are going to be offering fixed line voice, broadband, television and mobile services, which is commonplace around the world. Until the Three, O2 deal goes through, EE are the largest UK network with around 31 million customers.
The deal sees Deutsche Telekom and Orange, the original owners of EE, acquiring a part of BT. How big? Deutsche Telekom will own 12% and Orange takes 4%. This sort of power-sharing deal is commonplace in the industry as it’s a way of aligning all business interests in the takeover going well. BT will also have to take on debt of around £1 billion as a part of the deal but expects to save around £360 million in 2020, four years after completion. It’s a significant investment up front for planned cost savings down the line and indicative of the nature of the telecommunications business: carriers are huddling together to keep warm from the cold.
Will this deal change the British mobile landscape? Not immediately, it won’t. And the impact is likely to be less disruptive than the Three / O2 deal, but it also demonstrates how keen BT are to get back into the mobile market, having let O2 go a decade ago.