Having announced a few weeks ago that it was in ‘preliminary’ talks to purchase either EE or O2, telecoms giant BT has now confirmed that EE has emerged as the favoured choice.
The buyout, which will cost an estimated £12.5 billion, is expected to bring significant shake-up to the mobile market as BT seeks to expand its interests.
According to BT, its acquisition of EE will give it the largest 4G mobile network in the country, which alongside its massive Fibre network, will give the company a definite edge against competitors.
The company also stands to benefit from the 24.5 million customers already subscribed to EE.
The move allows BT to begin offering consumers so-called quad play bundles, already a staple of telecoms provision in mainland Europe. This means that in addition to subscribers having broadband, landline and television services through BT, they will also be able to receive mobile through the same provider.
This news, obviously a blow to O2’s parent company Telefonica, has also surprised some industry analysts, who believed that a purchase of O2 was more likely.
The relative ease of buying O2, which, under the name Cellnet, had been owned by BT until being sold in 2001, was cited as a major factor in BT’s alleged preference towards its former holding.
EE, on the other hand, has a more complicated infrastructure, having been formed five years ago by the merger of T mobile and Orange UK. It seems that EE’s larger 4G network may ultimately have been a deciding factor.
The deal still faces several hurdles before completion. It is widely expected that rivals to BT such as Sky and Vodafone, themselves in early-stage talks, will push for greater regulation of BT assets such as Openreach.
Media analyst Paolo Pescatore also sees this as a likely scenario. “The deal … combines the UK market leader in fixed-line with the number one mobile operator. Ofcom … could mandate the demerger of both of BT’s Openreach and Wholesale units.”
In addition, neither BT nor EE has fared particularly well in Ofcom’s customer service ratings recently, with BT coming off as the worst Pay TV and second worst landline provider, and EE providing the least customer satisfaction among mobile operators.
BT chief executive Gavin Patterson said that addressing the customer service issue will be the ‘number one priority’ in the coming year.