BT has entered exclusive talks with Deutsche Telekom and Orange to buy mobile network EE for £12.5 billion. BT’s full announcement on the situation is at the bottom of this post.
The discussion of terms to create Britain’s biggest mobile group will come as a surprise to some, as many believed BT would instead acquire O2, of Spanish group Telefonica — it would have been cheaper and less complicated for the telecoms giant.
The EE purchase would cost BT as much as £12 billion in cash and shares, the FT says. Apparently BT could announce the move as early as this afternoon.
Last week O2 was a strong frontrunner in BT’s move to tap into the industry; a deal between the two was supposedly “imminent”.
Either way, a mobile network acquisition will leave BT in a far more powerful position in the media world. Business Insider explained here how it looks as if the company is trying to “Americanise” the sector in the UK and introduce US-style “quad play” to the British market.
BT said in an email:
“BT Group plc (BT) announces that, further to its statement on 24 November 2014, it has entered into an exclusivity agreement with Deutsche Telekom and Orange in relation to BT’s possible acquisition of all of their UK mobile business, EE. The period of exclusivity will last several weeks allowing BT to complete its due diligence and for negotiations on a definitive agreement to be concluded.
The proposed acquisition would enable BT to accelerate its existing mobility strategy whereby customers will benefit from innovative, seamless services that combine the power of fibre broadband, wi-fi and 4G. BT would own the UK’s most advanced 4G network, giving it greater control in terms of future investment and product innovation.
While continuing these exclusive discussions, BT will progress its own plans for providing enhanced fixed-mobile converged services for businesses and consumers, in line with previous announcements. It remains confident of delivering on these plans should a transaction not take place.
The key headline terms, which are non-binding, include a purchase price of £12.5bn for EE on a debt/cash free basis. The consideration for EE will be payable as a combination of cash and new BT ordinary shares issued to both Deutsche Telekom and Orange. Following the transaction, Deutsche Telekom would hold a 12% stake in BT and would be entitled to appoint one member of the BT Board of Directors. Orange would hold a 4% stake in BT. In considering the financing of the cash element, BT has a range of options and is mindful of the importance of maintaining a conservative financial profile.
BT expects significant synergies mainly through network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs. In addition, BT expects to generate revenue synergies through selling fixed-line services to those EE customers who do not currently take a service from BT, and by accelerating the sale of converged fixed-mobile services to BT’s existing consumer and business customers.
The exclusivity agreement does not require the parties to enter into a transaction and there can be no assurances that one will occur. If a transaction is agreed, approval by BT’s shareholders will be required as a condition of the purchase.”
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