BT has had its plans to takeover mobile phone firm EE officially approved by the Competition and Markets Authority (CMA), paving the way to create a giant communications firm capable of covering fixed-line phones, broadband, mobile and TV.
The £12.5bn landmark deal is set to bring together the UK’s largest landline and mobile phone businesses, more than trebling BT’s retail customers by adding its current 10 million customers to EE’s 24.5 million direct mobile subscribers.
BT had announced its EE acquisition plans as long ago as February 2015, but had been waiting on the final clearance, which was given today by the CMA after months of deliberations, during which rivals such as TalkTalk and Vodafone complained about the potential power of the combination.
John Wotton, who chaired the inquiry into the deal, said evidence “does not show that this merger is likely to cause significant harm to competition or the interests of consumers.â€
BT chief executive Gavin Patterson said: “The combined BT and EE will be a digital champion for the UK, providing high levels of investment and driving innovation in a highly competitive market.”
What were the concerns for the wider market?
The concerns were focused on three areas. Firstly, BT already dominates the market for connecting up mobile masts, via its Openreach division. By owning EE, rivals feared BT would be able to use the clout of its mobile arm to make Openreach even more powerful.
Secondly, both BT and EE own the rights to chunks of the airwaves used for mobile networks. This spectrum is a finite and valuable resource, and owning more of it is seen as a strong advantage as demand for mobile data increases by as much as 70pc per year.
Thirdly, there were fears BT might not be as enthusiastic about wholesaling network capacity to retail rivals as EE has been. Virgin Mobile is based on EE’s network, for instance.
Why does BT want to buy EE?
Fundamentally, the takeover is a £12.5bn recognition of the growing importance of mobile connectivity.
Operators across Europe have moved towards offering consumers a ‘quad play’ of services – broadband, mobile, phone and pay TV – and EE completes the set for BT after its heavy investment in TV sport. Yet quad play is not BT’s main strategic rationale for buying EE. Instead, it has emphasised the ‘convergence’ of fixed-line and mobile broadband, and envisages increasingly blurred lines between the two. So within a few years, customers could subscribe to a single data connectivity package that covers them inside and outside the home through a combination of wired broadband, Wi-Fi and 4G.
The deal will also give BT a major presence on the high street to push its vision of the future via EE’s hundreds of stores.
Financially, EE also gives BT, which reported sales of £18bn and pre-tax profits of £2.6bn last year, even more heft. EE’s turnover under previous owners Orange and Deutsche Telekom was £6.3bn, and it reported a loss of £217m as it invested heavily in its network.