The competition regulator has given the final clearance for BT’s contentious £12.5bn takeover of EE, Britain’s largest mobile phone network.
The Competition and Markets Authority said it did not expect the takeover to lead to a substantial reduction in competition or be to the detriment ofconsumers in any market in the UK, including mobile and broadband services.
It said there was little overlap between BT’s mainly fixed phone, broadband and pay-TV business and EE’s mobile phone operation. The merger was also unlikely to make things worse for other operators using BT’s network.
In May 2015, the CMA started examining the deal, which takes BT back into the mobile phone market and cements its place as Britain’s biggest telecoms operator. It gave provisional approval to the takeover in October and said it had since taken extra time to study objections to the deal in a complex inquiry.
BT’s competitors, such as TalkTalk and Vodafone, and the consumer group Which? raised objections to the takeover and BT’s dominance of the UK telecoms sector. BT is buying EE from Deutsche Telekom and Orange, which will each become substantial shareholders in the UK company from the deal.
The communications regulator, Ofcom, is conducting a separate review of the telecoms market, including how BT meets its obligations to give competitors access to its network.
BT is the dominant provider of broadband services in the UK and EE’s 27 million customers make it the largest mobile phone company. Through its Openreach division, BT also owns the infrastructure through which much of the UK’s broadband is channeled via other companies such as Sky, as well as providing capacity to mobile operators to transfer data from phone masts to other networks.
John Wotton, who chaired the CMA’s inquiry, said: “Since our provisional findings, we have taken extra time to consider responses in detail but the evidence does not show that this merger is likely to cause significant harm to competition or the interests of consumers.
“The retail mobile services market in the UK is competitive, with four main mobile providers and a substantial number of smaller operators. 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 the merger will have a significant effect in this market.”
Wotton said the CMA’s study was limited to the effects of the takeover of EE and that Ofcom’s review was where wider concerns about the telecoms market would be addressed.
BT’s chief executive, Gavin Patterson, said: “It is great news that the CMA has approved our acquisition of EE. We are pleased they have found there to be no significant lessening of competition following an in-depth investigation lasting more than 10 months.”
TalkTalk said it was not surprised at the CMA’s decision but that it would give BT more power than it had before, as British Telecom, it was privatised 30 years ago. The mobile and broadband operator said that with Three planning to buy O2 there would be a further reduction in competition.
TalkTalk said: “It is dangerous that the regulator has looked at this merger in isolation, given the unprecedented levels of consolidation taking place in the wider telecoms industry.
“Given BT Group’s increased size and scale, the need to ensure that the UK’s broadband infrastructure is not neglected is more important than ever, and we have every confidence that Ofcom will take this into account when considering the future structure of Openreach.”
Which? had said the merger could lead to worse customer service because BT and EE had poor records. It also warned that more “bundled” packages of services would make it harder for consumers to compare deals .
The consumer group’s chief executive, Richard Lloyd, said: “Fewer players in a market is rarely a good thing, but now this deal has been approved both companies must urgently address their abysmal customer service record. The regulator will need to keep a very close eye on this to ensure consumers really do benefit from the deal and be prepared to step in if not.”
BT said it would issue a formal prospectus for the deal in the last week of January, with the takeover scheduled to close on 29 January. Deutsche Telekom and Orange will own 12% and 4% of BT respectively once the deal has been completed.
The layrinthine saga of UK mobile phone operator ownership
BT’s all-clear to buy EE is the latest chapter in the labyrinthine saga of the UK’s mobile phone industry.
In the beginning was Cellnet. Back in 1985, when mobile phones were the size of today’s personal computers, Cellnet was majority owned by BT, with Securicor (now known as G4S) owning the remainder.
BT later bought out Securicor before rebranding Cellnet as O2. That business was subsequently sold to Spain’s Telefonica for £18bn in 2005.
Early competitors for Cellnet included Mercury One 2 One, launched in 1993, and Orange.
Mercury One 2 One eventually became part of Deutsche Telekom under the moniker T-Mobile. Orange changed hands multiple times until it was snapped up by France Telecom in 2000 for £31bn.
Orange and T-Mobile came together in 2010, when France Telecom and Deutsche Telekom agreed a deal to create Everything Everywhere (EE). Now BT is on the verge of taking over EE for £12.5bn.
Meanwhile O2 (containing the original BT Cellnet, don’t forget) has been sold to Hong Kong firm Hutchison Whampoa, which owns mobile competitor Three, for £10.25bn.
Once BT has completed its deal for EE, it will own the offspring of its original competitors.
Meanwhile, its original mobile business Cellnet has, over the course of three decades, transmogrified into its biggest competitor, in the shape of the combined O2 and Three.
Confused? You should be.
