BT’s bid for EE cleared by the Competition and Markets Authority
19 January 2016 by Leon Pascal
Last year we reported that BT Group plc (“BT”) were in talks with several mobile operators with a view to re-entering the mobile market and followed this up with a blog looking at the pros and cons of mobile mergers.
On 15 January 2016, BT’s £12.5bn acquisition of EE Limited (“EE”) was given final clearance by the Competition and Markets Authority (“CMA”) on the basis that BT are ‘strong in supplying fixed communication services (voice, broadband and pay TV)’ and that EE are ‘strong in supplying mobile communications services’ with ‘limited overlap between the two’. The takeover was originally announced in February 2015 and had been provisionally approved by the CMA in October 2015.
Why are BT interested in acquiring EE?
By acquiring a mobile communications giant such as EE, BT will be able to offer a so-called ‘quad-play’ bundle, selling landline, mobile, internet and TV to consumers in one package. Rivals such as Virgin Media and TalkTalk already sell this type of package, with providers such as Vodafone and Sky not too far behind.
How much market share will a combined BT/EE have?
BT already controls approximately 31% of the fixed broadband market and 37.6% of the home landline market. Since the birth of EE in 2010 (following the merger of Orange and T-Mobile), EE have controlled approximately 33.8% of the mobile market. In terms of customers, BT’s 10 million retail customers will be added to EE’s 24.5 million mobile subscribers.
What impact will the deal have on customers of BT/EE?
By enabling customers to bundle their home phone, internet, TV and mobile phones into one contract, there are (in theory) going to be big savings for customers. Further, the new ‘super operator’ would be able to invest heavily in maintaining and upgrading the existing 4G network, potentially also spurring on the arrival of the new 5G network in the coming years.
Conversely, by having a quad-play deal it will likely be more expensive for consumers to switch to rival, individual services making consumers less inclined to do so. Even if a rival network had a better individual deal on a particular product that a consumer wanted, the relative costs in switching may persuade the consumer to stick with BT/EE.
Is the deal likely to prompt further consolidation in the mobile phone market?
There are several similar proposed transactions in the pipeline, the most similar being a proposed tie up between Vodafone and Virgin. Elsewhere, CK Hutchinson Holdings Limited (the company that owns mobile operator Three) are in talks to acquire O2, the mobile operator that started life as BT Cellnet in 1985 as a joint venture between BT and Securicor, but that was sold off by BT in 2002.
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