UK regulator approves BT takeover of DT/Orange mobile operator EE

BT will take over the UK’s largest mobile operator, EE, by the end of January 2016 after the country’s competition regulator gave the deal its approval.

The £12.5 billion deal will close on 29 January, said BT in a statement, after which Deutsche Telekom will own 12% of BT and provide one director to BT’s board. Orange will own 4% of BT. At the moment EE is a 50-50 joint venture of Orange and Deutsche Telekom.

The Competition and Markets Authority said 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.”

Following the merger the CEO of EE will be Marc Allera, now the company’s chief commercial officer. Current CEO Olaf Swantee has already announced his departure.

BT CEO Gavin Patterson said: “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. I have no doubt that consumers, businesses and communities will benefit as we combine the power of fibre broadband with the convenience of leading edge mobile services.”

BT said that “there will be a distinct EE line of business following the merger”, but the company has not said anything about long-term branding as EE is integrated into the wider BT group. 

The position of BT Openreach as the UK’s last-mile provider is under question after the decision, though the CMA did not recommend any changes. 

Allen & Overy lawyer John Wotton, who chaired the enquiry for the CMA, said: “We have heard wider concerns about the sector, including about 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.”

However the UK’s telecoms regulator Ofcom is looking at a potential separation of Openreach into an independent company and senior BT executives are known to be considering the mechanics of a separation. 

Many of the submissions to the CMA dealt with Openreach’s position as a BT subsidiary that is expected to work with all competitors equally. TalkTalk, which has long taken an aggressive position on Openreach, said that in the current set-up “Openreach is able to impose unreasonable terms.” 

Vodafone, whose CEO Vittoria Colao has said the group would be interested in a joint ownership of Openreach, said: “There is no transparency over BT Openreach’s process or methodology,” and added: “There is clearly ample scope for BT Openreach to discriminate.” 

Ofcom is expected to take a final decision on Openreach by the end of January, possibly coinciding with the completion of the BT-EE merger.