BT raised the hope of cheaper deals for customers today as it announced that it had agreed terms for a £12.5 billion takeover of EE, the UK’s biggest mobile operator.
The telecoms giant will swallow up the firm in a cash and shares deal that it hopes to complete by the end of the summer should regulators give the all-clear to create what it describes as the UK’s leading telecommunications provider.
It will enable BT to sell its fixed telephone, broadband and TV services to EE’s customers, and accelerate its plans to offer seamless convergence between fixed Wi-Fi and high-speed fibre networks with mobile 4G technology.
Chief executive Gavin Patterson hailed the deal as a “major milestone”, adding: “This is a very exciting time and a new chapter for BT.”
It marks BT’s re-entry into the mobile phone market for the first time since spinning off its BT Cellnet operation in 2001.
The group had announced in December that it was in exclusive talks to buy EE, which has 24.5 million direct mobile customers, as it spurned the possibility of regaining control of its old business, now known as O2.
Mr Patterson appeared to signal cheaper deals for customers as the deal was announced, saying that some savings from “simplifying the network” would be passed on.
He said: “If you look across the continent, prices have come down to some extent when fixed and mobile products are sold as a bundle.”
The deal comes as the telecoms sector is convulsed by a round of consolidation as rivals shore up their positions.
Three owner Hutchison Whampoa is in talks to buy rival O2 for £10 billion from Spain’s Telefonica - which would create a new mobile market leader - while Sky has announced plans for its own mobile offering using O2’s network.
Analysts at Edison Investment Research said the telecoms landscape had been transformed but added that whether this was good for consumers was “a very different question” as bundling products together would make it harder to compare prices.
The EE transaction will be partly financed by a £1bn share issue while EE’s current owners Deutsche Telekom and Orange will hold stakes of 12 and four per cent respectively in BT.
Deutsche Telekom will be entitled to a seat on the board and chief executive Tim Hottges said the deal laid the foundations for the companies “to be able to work together in the future”.
BT said it expected eventually to achieve combined operating cost and spending synergies of around £360m.