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December 17, 2014

Wheelings & Dealings: The Ball is in Motion for BT to Acquire EE

BT Group plc, more commonly known as BT, is a British multinational telecommunications services company with its headquarters in London. In addition, it has operations in about 170 countries. Through its BT Global Services division it is a supplier of telecom services to corporate and government customers worldwide.

BT is not a new player in the telecommunications world, in fact, its origins date as far back as the founding of the Electric Telegraph Company in 1846. For 168 years BT has been a fixed line operator, but that could change quite soon. About a month ago, BT mentioned that it was in talks to acquire either EE, formerly known as Everything Everywhere, a U.K. mobile network operator and Internet service provider, or O2 which is owned by Spanish firm Telefonica.

This week, BT announced that it is now in exclusive talks to purchase EE. Britain’s largest mobile network group is currently owned by Deutsche Telekom AG and Orange SA. The deal is set with a price tag of $19.5 billion. The payment is said to be in cash and new BT shares. It would be divided equally between Deutsche Telekom and Orange.

The period of exclusivity will last at least several weeks with any deal needing the approval of BT shareholders. Following the transaction, Deutsche Telekom would hold a 12 percent stake in BT and would be entitled to appoint one member of the BT Board of Directors. Orange would hold a 4 percent stake in BT.

In a statement, BT said "The proposed acquisition would enable BT to accelerate its existing mobility strategy." The acquisition would create a communications giant covering fixed line phones, broadband, mobile and TV. Last year BT said that it would deliver seamless handover of calls from 3G to 4G/LTE, this purchase would allow the company to fulfill its promise.

According to the Yankee Group, the acquisition would provide a portfolio of consumer communications services that will put most rivals in the shade. BT’s land-line assets and track record are undisputed. By adding the country’s largest mobile operator, which is considered to be a clear leader in 4G, BT, in turn, becomes a clear leader in the U.K. telecom services market.

The speculation is that the competition must respond in kind. This could lead to companies such as Vodafone, Sky and Virgin contemplating similar transactions. Telefonica seems interested in selling O2. BT’s acquisition could accelerate the sale of O2 U.K. One name that may enter into the fray is Liberty Global. It is possible that it could see owning O2 as a way to ward off the attentions of Vodafone.




Edited by Maurice Nagle


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