Bid cleared in spite of rivals' concerns
BT cleared to acquire EE and create ‘digital champion’
BT’s £12.5 billion acquisition of the mobile network EE has been approved by the Competition and Markets Authority without the need for conditions.
The decision will put BT into a commanding position as a “quad play” operator – fixed line, broadband, television and now mobile. It will add 27 million customers.
John Wotton, who chaired the 10-month inquiry into the deal, said: “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 that the merger will have a significant effect in this market.”
BT 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.
“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. 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”.
A prospectus will be issued in the week commencing 25 January with the deal set to close on 29 January when Deutsche Telekom and Orange will receive shares in BT. BT will report its third quarter results on 1 February.
Deutsche Telekom will have 12% of BT shares and Orange 4%. A representative of Deutsche Telekom will be appointed to the BT board in due course. Marc Allera, EE chief commercial office, will become EE chief executive.
The decision was not without critics. The ruling, though expected, comes in the face of a range of strong objections from around the UK telecoms industry. Sky, TalkTalk, O2, Vodafone, Virgin Media are among those who have responded to the provisional findings in October last year with similar complaints, including:
- That such a merger will have a negative impact on competition in the UK telecoms marketplace
- That it will provide BT EE with an unequal and unfair percentage ownership of the UK’s 3G and 4G mobile spectrum
- That it gives BT EE too much power to moderate the wholesaling of network capacity to MVNOs (Mobile Virtual Network Operators such as Virgin Mobile who rely on EE’s infrastructure)
Dan Howdle, telecoms expert at consumer mobile and broadband advice site, Cable.co.uk, said: “There can be no doubt as to the power over the UK consumer telecoms market BT EE now wields which is precisely why the wider industry has persistently urged the CMA not to rush ahead with this decision, but to take into consideration, and to fully explore their commonly held objections.
“Sky, for example has been at pains to point out that not only are there – in its opinion – “fundamental flaws” in the economic analysis performed by the CMA, but that the CMA itself contains dissenting members who appear to share the view that the merger will prove a disaster for UK telecoms, and in turn for consumers.
“The CMA believes the new merged company is, by default, financially incentivised to continue to supply wholesale services to other providers (Virgin Mobile, for example runs on the EE Network), which will prevent it from closing its doors to third-party operators in an attempt to monopolise its own network infrastructure.
“The greatest concern for its competitors, then, is that, though unlikely – as the CMA points out – no firm measure has been put in place to actively prevent it.”