Telecom giant BT Group has reached “exclusive negotiations” with wireless operator EE, to acquire the joint venture between Orange and Deutsche Telekom for £12.5 billion.
First reported a few months ago as a decision between EE and O2 has finally been confirmed. BT chose EE over O2, due to EE’s largest customer base, 4G spectrum and O2 owner Telefonica wanting 20 percent stake in BT.
The acquisition of EE will be split in BT shares and cash. Deutsche Telekom will maintain a 12 percent share in BT, Orange will hold a 4 percent share. BT did not disclose the split between cash and shares.
BT also did not reveal how it intends to pay for the rest of EE, considering it has the largest pension deficit in the FTSE 100. The TV provider still has to keep cash for Premier League licensing deals, competing against Virgin Media and Sky.
The acquisition of EE would give BT the quad-play of services—broadband, mobile, TV and landline—allowing them to bundle all of the services into one package. If customers latch onto this type of service, it could give BT millions more yearly subscribers.
The mobile industry is also more profitable, due to high-end phone profits, allowing companies like EE and O2 to maintain active yearly profits. BT should hit £45 billion in revenue with the acquisition, EE adding £6.5 billion into the pot.
EE currently has 24.5 million customers, including 6 million 4G customers. This is the most customers on any wireless carrier in the UK and twice the amount of 4G customers, compared to the second place.
BT might face trouble with regulators in the UK, alongside Sky and Virgin Media both looking to stop the deal. Meanwhile, Sky is eyeing up an acquisition of O2 and Virgin Media is apparently in talks with Vodafone over a possible deal.
