UK incumbent telco BT has finalised terms to buy the country’s largest mobile operator EE from joint owners Deutsche Telekom and Orange for £12.5bn (US$19bn).
The deal would give Germany’s Deutsche Telekom a small cash payment and roughly £5.1bn…
UK incumbent telco BT has finalised terms to buy the country’s largest mobile operator EE from joint owners Deutsche Telekom and Orange for £12.5bn (US$19bn).
The deal would give Germany’s Deutsche Telekom a small cash payment and roughly £5.1bn in BT shares to become its largest individual shareholder with a 12% stake, as well as a seat on its board. France’s Orange would receive £3.4bn in cash and shares worth about £1.7bn, giving it a 4% share of BT.
The companies expect EE’s existing £2.1bn in debt to remain outstanding after the acquisition, which they aim to complete before the end of March 2016 following shareholder and regulatory approvals. There is also a £250m break-up fee.
The fixed-line operator intends to fund the cash portion of the deal through debt financing and a £1bn equity placing.
Deutsche Telekom will be blocked from buying additional BT shares for three years after completing the transaction, unless it acquires them from Orange, in which case there is a 15% cap. Orange will be unable to increase its holding above 4% for the three years.
BT CEO Gavin Patterson said: “The UK’s leading 4G network will now dovetail with the UK’s biggest fibre network, helping to create the leading converged communications provider in the UK.”
EE has 24.5 million direct mobile customers, however, its position as the country’s biggest network is under threat as Hong Kong’s Hutchison Whampoa, owner of its UK rival Three, is in talks to buy number two mobile player O2.
Dan Ridsdale, analyst at Edison Investment Research, said: “In the space of a few months the UK telecoms landscape has changed enormously. As the majors fill in the gaps in their offerings, competition to offer multi-play bundles is going to step up significantly.
“Whether this will be beneficial for consumers is a very different question. The bundling of services makes it much more difficult to compare pricing while more premium TV content is likely to move away from free to air.”
EE was formed in 2010 when Orange and Deutsche Telekom merged their UK operations. The acquisition also marks a return to mobile for BT, which sold O2 to Spain’s Telefonica nine years ago.
Goldman Sachs is acting as lead financial adviser to BT, while JP Morgan is acting as financial adviser, sponsor and corporate broker. Perella Weinberg is also acting as a financial adviser for BT.
