The UK’s Competition and Markets Authority (CMA) has approved the sale of mobile operator EE by joint owners Orange and Deutsche Telekom to BT with no conditions. The competition authority had provisionally approved the £12.5bn (US$19bn) fixed/mobile deal last October, after referring the case for an in-depth phase two investigation in June 2015.
The UK’s Competition and Markets Authority (CMA) has approved the sale of mobile operator EE by joint owners Orange (EPA:ORA) and Deutsche Telekom (ETR:DT) to BT (LSE:BT) with no conditions. The competition authority had provisionally approved the £12.5bn (US$19bn) fixed/mobile deal last October, after referring the case for an in-depth phase two investigation in June 2015.
BT said the deal is expected to close on 29 January, earlier than the previous March 2016 target date, adding that it would report Q3 2015/16 results on 1 February.
Orange said it would receive about £3.4bn (€4.5bn) in cash and a 4% stake in the combined BT/EE entity.
Deutsche Telekom, for its part, will receive a 12% stake in the enlarged group and a seat on BT’s board. It noted that BT’s share price had risen by some 10% since the deal’s announcement in February 2015.
Deutsche Telekom CEO Timotheus Höttges said: “We look forward to supporting BT with relevant expertise to help generate the anticipated value growth of its integrated business model”. He noted that his company offered fixed/mobile bundles to three million customers in Germany, Slovakia, Hungary, Romania and Macedonia.
The UK incumbent said EE would remain a distinct line of business led by Marc Allera as CEO, as announced earlier this month.
Convergence deal an “important signal” for European operators
Stéphane Richard, the chairman and CEO of Orange, said: “We are very proud of what we have achieved over the past 15 years through Orange and then EE. The combination with BT is a very positive step forward for UK consumers who are set to benefit from convergent fixed-mobile services. We are very happy with today’s decision, which provides an important signal for telecoms operators across Europe that the sector is ready for fixed-mobile consolidation.”
BT CEO Gavin Patterson said the company was pleased that the CMA had “found there to be no significant lessening of competition following an in-depth investigation lasting more than ten months”.
“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.”
Deutsche Telekom said EE’s 4G network covers over 93% of the population and serves more than 31 million customers, adding that BT commands a 32% market share in broadband and is showing strong growth in TV.
BT open to partnerships with DT
BT will consider strategic partnerships with Deutsche Telekom, its chairman Sir Mike told the Financial Times earlier this week, before the acquisition closed. These could include media deals, following the telco’s success with premium TV content, said Rake, who declined to rule out an offer for privatization candidate Channel 4.
Asked about the likelihood of a future bid by its soon to be German partner, Rake described the UK as “one of the most open economies in the world” and emphasized that there is no golden share, but added that there was a three-year standstill, during which time BT would integrate EE.
CMA sees fixed and mobile as distinct, refers Openreach question to Ofcom
The CMA acknowledged that the proposed merger of the UK’s largest fixed-line and mobile businesses had prompted concerns among rivals and customers.
Following what it described as a “complex, detailed and rigorous” review, the authority said its inquiry group had decided that the merger is “not expected to result in a substantial lessening of competition in any market or markets in the UK, including in relation to the supply of retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail broadband services.”
Noting that the two groups “operate largely in separate areas,” the watchdog said it had examined how the merger would impact consumers and also wholesale agreements with other companies since BT provides fixed-line services, including backhaul, to mobile operators EE, O2, Three and Vodafone, while MVNO Virgin Media runs on EE’s network.
According to CMA inquiry chair John Wotton, “We have heard wider concerns about the sector, including about [BT’s infrastructure business] Openreach and its regulation by Ofcom. Our job has been to examine the specific impact of this merger on competition and consumers and, where relevant, we’ve looked at how these issues might be affected by the merger. There is also an ongoing Ofcom review into the sector and its future regulation, where such concerns may have more relevance.”
European Commission’s review of Three/O2 continues
While the fixed/mobile deal has proved palatable, it remains unclear what the European Commission will decide in its review of a merger between two of EE’s mobile rivals, Three and O2.
The CMA had asked to carry out the review of Three-O2, but the request was declined as expected.
The commission has so far adopted a cooler stance on in-market mergers, leading to a decision in September by TeliaSonera and Telenor to abandon an agreed Danish joint venture.
Aside from Three/O2, the commission is also reviewing Vimpelcom and 3 Italia’s proposed 50/50 merger in Italy. It is likely that French competition authorities would refer any transaction between Orange and Bouygues, but that will reportedly depend on the portion of the French incumbent’s revenue coming from France in its upcoming results.
