The U.K.’s competition authority approved BT’s £12.5 billion (€16.7 billion) bid for EE Friday, clearing the way for the tie-up between the U.K.’s incumbent fixed-line provider and the largest mobile operator.
“The evidence does not show that this merger is likely to cause significant harm to competition or the interests of consumers,” said John Wotton, the Competition and Markets Authority (CMA) inquiry chair. “As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect. Similarly, EE is only a minor player in retail broadband, so again it is unlikely that the merger will have a significant effect in this market.”
The merger will create a giant in the U.K. telco market, with BT able to bundle mobile with fixed telephony, Internet and pay-TV. The U.K. has so far lagged behind other European countries such as Spain or France in adopting so-called quadra- and triple-play telco packages. EE has 30 million customers across its mobile, fixed and wholesale businesses.
Deutsche Telekom and Orange, who co-owned EE, each receive a stake in BT as a result of the deal, with the German company holding 12 percent and France’s former monopoly provider 4 percent.
“We are very happy with today’s decision, which provides an important signal for telecoms operators across Europe that the sector is ready for fixed-mobile consolidation,” said Stéphane Richard, Orange Group CEO.
The merger had drawn strong criticism from other U.K. mobile and broadband operators, including Vodafone, Virgin and TalkTalk.
In parallel, they have been urging the U.K. telecoms regulator Ofcom to break up BT, to create a new and independent company responsible for managing the U.K.’s legacy network.
The CMA acknowledged these concerns but said that Ofcom was better placed to deal with them.
“We have heard wider concerns about the sector,” the CMA’s Wotton said. “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. There is also an ongoing Ofcom review into the sector and its future regulation, where such concerns may have more relevance.”
The blanket approval for the merger is controversial. Half of the Competition and Markets Authority’s investigation team expressed serious concerns that the merger would restrict competition on the wholesale mobile market, where both BT and EE offer mobile services to other operators. Yet that position did not achieve the required two-thirds majority within the team.
“BT should be able to sell its fixed-line services to EE customers who currently use another broadband supplier, as well as seeking to persuade existing BT fixed-line customers to take mobility services from EE,” said analyst Stephen Howard, head of the telecoms, media and research team at HSBC. However he warned this risked triggering an “aggressive” response from rivals including “price discounting.”
Rival mobile provider Three is currently seeking European Commission approval for its £10.25 billion (€13.8 billion) bid for U.K. mobile operator O2. The Commission opened an in-depth probe into the deal on October 30.