BT and EE £12.5bn takeover deal approved by government
Posted by Damien Biddulph on Mon 18th Jan 2016
BT has been given the green light to complete its £12.5bn acquisition of EE after the Competition and Market Authority (CMA) gave its approval to the purchase.
The deal was first announced almost a year ago, as BT looked to broaden its offerings and become a quad-play company to offer internet, TV, phone and mobile services.
The size and scope of the acquisition meant it was sent to the CMA for approval to ensure it would not unbalance the UK telecoms market. Numerous rivals to BT, such as Virgin Media, Sky and Vodafone, all submitted responses to the CMA raising concerns.
However, CMA investigation chairman John Wotton said that after a 10-month investigation it was satisfied that the takeover would not unduly affect the mobile or fixed broadband market and that it was cleared for completion.
“As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect. Similarly, EE is only a minor player in retail broadband, so again it is unlikely that the merger will have a significant effect in this market," he said.
“We have also found that in supplying services such as backhaul, wholesale mobile or wholesale broadband services, a combined BT/EE would not have the ability and the incentive to disadvantage competitors such that there would be significant harm to competition.”
BT chief executive Gavin Patterson was understandably upbeat on the news, claiming that it will help BT drive digital innovation in the UK.
“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,” he said.
“I have no doubt that consumers, businesses and communities will benefit as we combine the power of fibre broadband with the convenience of leading-edge mobile services. I look forward to welcoming EE into the BT family.”
EE brand likely to disappear
The green light from the government is likely to see BT embark on a major push into the mobile arena as soon as possible, although Kester Mann, principal analyst for operators at CCS Insight, said that the company would be wise to retain the EE brand for the near future, given its strong place in the market.
“The EE brand has benefitted from strong investment to become synonymous with widespread 4G coverage,” he said.
“A greater priority for BT is the behind-the-scenes integration of the UK’s largest fixed-line and mobile operators. Only then should it look to articulate changes to consumers.”
Over time, though, he said it is inevitable that BT will replace EE, and that a major high-street rebranding of shops will be one of the big tasks facing BT.
“BT’s lack of retail presence is its Achilles' heel, but converting EE shops will enable it to present and communicate bundles of mobile, broadband and TV face-to-face.”
However, Mann said that BT could more quickly lose the EE brand on the enterprise side, as it is a far more established presence.
"On the enterprise side, BT might be better advised to rebrand more quickly given its already established strong presence in this sector. Indeed, the company might well end up taking a phased approach that retains the EE name for longer in certain segments before withdrawing it completely in the long-term," he added.