BT opts for EE over Telefonica as it enters exclusive negotiations with DT and Orange Group

16 Dec 2014

Following reports last month that BT was in talks with both O2 UK owner Telefonica and the parent companies of EE, Orange Group and Deutsche Telekom (DT), it has now been confirmed that the British fixed line incumbent has entered into an exclusivity agreement with the French and German companies over a possible acquisition of all of their UK mobile business. According to a press release issued by BT regarding the matter, the period of exclusivity will last ‘several weeks’, a timeframe which should allow the company to both complete its due diligence and conclude negotiations on a definitive agreement.

Key headline terms of the deal include a purchase price of GBP12.5 billion (USD19.6 billion) for EE on debt/cash free basis, with BT noting that the consideration will be payable as a combination of cash and new BT ordinary shares issued to both DT and Orange Group. As such, following the conclusion of the transaction DT is expected to hold a 12% stake in BT, entitling it to appoint one member of the BT board of directors, while Orange Group will hold a 4% stake in BT.

Should a deal be reached, BT has said it expects ‘significant synergies’, with these to come mainly via network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs. Further, the British operator expects to generate revenue synergies through selling fixed-line services to those EE customers that do not currently take a service from BT, while also accelerating the sale of converged fixed-mobile services to its own existing subscriber base.

Meanwhile, alongside continuing these exclusive discussions, BT has confirmed it will progress its own plans for providing enhanced fixed-mobile converged services, adding that it remains confident of delivering on these plans should it not reach a final deal to acquire EE.

United Kingdom, BT Group (incl. Openreach), Deutsche Telekom (DT), EE, O2 UK, Orange Group, Telefonica