BT has agreed to buy EE, the UKs largest mobile phone network, in a cash and shares deal worth £12.5 billion. The deal, which BT said would create the UK’s leading communications provider, will be partly financed by a £1 billion share issue.
Following the transaction, EE’s current owners Deutsche Telekom and Orange will hold stakes of 12% and 4% in BT. Deutsche will be entitled to a seat on the board.
BT’s CEO Gavin Patterson said:
“This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them.”
BT said the transaction was subject to approval from shareholders and clearance from the Competition and Markets Authority. It is expected to complete before the end of the financial year ending in March 2016.
It is buying what is currently the UK’s leading network, with 24.5 million direct mobile customers.
However this position is under threat as Hutchison Whampoa, owner of rival Three, is in talks to buy number two operator O2.
BT said that by combining EE’s 4G network with its extensive superfast broadband network it would have greater scope for future investment and product innovation.
It said that it expected to achieve combined operating cost and spending synergies of around £360 million a year in the fourth year after the deal completes.
The group plans to sell a full range of its services to the combined customer base, including BT offering broadband, fixed line and pay-TV services to those EE customers who do not currently take a service from it.
BT’s CEO Gavin Patterson said:
“This is a very exciting time and a new chapter for BT.”
BT had been planning to offer mobile consumer services through a wholesale tie-up with EE but said the takeover offered “far more control of our own destiny”.
Patterson appeared to signal cheaper deals for customers saying some savings from “simplifying the network” would be passed on.
He said:
“If you look across the continent, prices have come down to some extent when fixed and mobile products are sold as a bundle.”
Patterson said he expected the transaction to be passed by competition regulators without BT having to make any concessions and that, if it avoids an in-depth probe, it should be complete by the end of the summer.
He said the deal did not reduce the number of mobile networks available in the UK and was consistent with telecoms firms in Europe which also had both fixed and mobile operations.
The chief executive said the question of whether EE’s 580 shops would be re-branded was “something we’ll look at more around completion” though he added: “Initially, we’ll keep the EE brand.”
Mr Patterson said the money being spent on the deal did not affect its plans ahead of the imminent Premier League rights auction as it limbers up for an expected multibillion-pound battle with rival Sky.
EE chief executive Olaf Swantee said:
“Joining BT represents an exciting next stage for our company, customers and people.
“In the last few years alone, we have built the UK’s biggest, fastest and best 4G network, significantly advancing the digital communications infrastructure for people and businesses across Britain.
“Today’s announcement will ensure the UK remains at the forefront of the mobile revolution, bringing even more innovation and investment in world leading connectivity for our customers.”
Deutsche Telekom chief executive Tim Hottges said:
“The transaction is much more than just the creation of the leading integrated fixed and mobile network operator in Europe’s second largest economy.
“We will be the largest individual shareholder in BT and are laying the foundations for our two companies to be able to work together in the future.”
Orange chief executive Stephane Richard said: “This is a landmark transaction for Orange and the next natural step in the evolution of BT and EE.”
