BT raised the hope of cheaper deals for customers today as it announced that it had agreed terms for a £12.5 billion takeover of EE, the UK’s biggest mobile operator.
The telecoms giant will swallow up the firm in a cash and shares deal that it hopes to complete by the end of the summer should regulators give the all-clear to create what it describes as the UK’s leading telecommunications provider.
It will enable BT to sell its fixed telephone, broadband and TV services to EE’s customers, and accelerate its plans to offer seamless convergence between fixed Wi-Fi and high-speed fibre networks with mobile 4G technology.
Chief executive Gavin Patterson hailed the deal as a “major milestone”, adding: “This is a very exciting time and a new chapter for BT.”
It marks BT’s re-entry into the mobile phone market for the first time since spinning off its BT Cellnet operation in 2001.
The group had announced in December that it was in exclusive talks to buy EE, which has 24.5 million direct mobile customers, as it spurned the possibility of regaining control of its old business, now known as O2.
Mr Patterson appeared to signal cheaper deals for customers as today’s deal was announced, saying that 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.”
The deal comes as the telecoms sector is convulsed by a round of consolidation as rivals shore up their positions.
Three owner Hutchison Whampoa is in talks to buy rival O2 for £10 billion from Spain’s Telefonica - which would create a new mobile market leader - while Sky has announced plans for its own mobile offering using O2’s network.
Analysts at Edison Investment Research said the telecoms landscape had been transformed but added that whether this was good for consumers was “a very different question” as bundling products together would make it harder to compare prices.
The EE transaction will be partly financed by a £1 billion share issue while EE’s current owners Deutsche Telekom and Orange will hold stakes of 12% and 4% respectively in BT.
Deutsche Telekom will be entitled to a seat on the board and chief executive Tim Hottges said the deal laid the foundations for the companies “to be able to work together in the future”.
BT said it expected eventually to achieve combined operating cost and spending synergies of around £360 million. Shares rose 5%.
Mr 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.
“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.
“Consumers and businesses will benefit from new products and services as well as from increased investment and innovation.”
BT said the transaction was subject to approval from shareholders and clearance from the Competition and Markets Authority (CMA).
It is expected to complete before the end of the financial year to March 2016 though Mr Patterson said that, if it clears CMA scrutiny at the first hurdle, the deal should be finalised by the end of the summer.
BT already offers mobile services for business through a wholesale tie-up with EE and is still planning to launch a wider consumer offering soon but Mr Patterson said the takeover offered “far more control of our own destiny”.
He played down the likelihood of having to make concessions to regulators, saying the deal did not cut the number of UK mobile networks and was consistent with firms in Europe which also had both fixed and mobile operations.
The chief executive said the EE brand would be kept at its 580 shops initially but added that this was “something we’ll look at more around completion”.
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.
Dan Ridsdale, analyst at Edison Investment Research, said: “In the space of a few months the UK telecoms landscape has changed enormously.
“As the majors fill in the gaps in their offerings, competition to offer multi-play bundles is going to step up significantly.
“Whether this will be beneficial for consumers is a very different question. The bundling of services makes it much more difficult to compare pricing while more premium TV content is likely to move away from free to air.”