BT’s £12.5bn acquisition of mobile operator EE has been provisionally approved by the UK’s Competition and Markets Authority despite rivals’ concerns about the wholesale mobile market.
BT’s (LON:BT) £12.5bn (US$19bn) acquisition of mobile operator EE has been provisionally approved by the UK’s Competition and Markets Authority (CMA) despite rivals’ concerns about the wholesale mobile market.
The CMA inquiry group assessed the merger’s impact on 10 separate markets and unanimously decided there would not be a “serious lessening of competition” in nine of them.
The group was evenly split, however, on the impact on the wholesale mobile market, where BT provides backhaul services to connect mobile operators’ towers to core networks.
The CMA requires a two-thirds majority to rule there will be a “serious lessening of competition”, so the merger was passed without any remedies despite the differing opinions.
John Wotton, who chaired the inquiry, said: “We have heard a number of concerns from competitors. After a detailed investigation, our provisional view is that these concerns will not translate into a competition problem in practice.”
Wotton said the CMA looked at whether, as a merged company, BT-EE could try to disadvantage competitors in backhaul, wholesale mobile and wholesale broadband services.
“We have provisionally found that in some areas it is unlikely that they would have both the ability and incentive to do so – and in others that the effects of their attempting to do so would be limited,” he said.
On the question of BT’s infrastructure unit Openreach, which rivals’ have been lobbying to have separated from the incumbent, the CMA said it had not found serious issues relating to the merger. The antitrust body referred to Ofcom’s wider review of the telecoms market, which will examine Openreach’s future ownership.
BT CEO Gavin Patterson welcomed the news, saying the company is “pleased that the CMA has provisionally approved BT’s acquisition of EE”.
He added: “The combined BT and EE will be good for the UK, providing investment and ensuring consumers and businesses can benefit from further innovation in a highly competitive market.”
The CMA has now set a deadline of 16 January 2016 for it to consider feedback to its provisional approval. Comments to the regulator must be submitted by19 November.
BT has previously said it does not expect the deal, agreed in principal last December, to close until the end of March 2016. It is buying EE from European giants Deutsche Telekom and Orange, which own the operator 50-50.
The deal will give Deutsche Telekom a small cash payment and roughly £5.1bn (US$7.7bn) in BT shares to become its largest individual shareholder with a 12% stake, as well as a seat on its board. France’s Orange is set to receive £3.4bn (US$5.2bn) in cash and shares worth about £1.7bn (US$2.6bn), giving it a 4% share of BT.
The tie-up has been considered less contentious than the consolidation of two of EE’s mobile rivals, Three and O2. That deal is being reviewed by the European Commission (EC), which has adopted a cooler stance on in-market mergers.
The CMA has asked to carry out the review of Three-O2 itself, but industry sources expect the EC – which has until 30 October to decide – will rebuff the request.
