VODAFONE IS NOT A HAPPY BUNNY regarding the announcement that BT is in exclusive talks to buy EE for an eye-watering £12.5bn.
The UK telecoms giant fears it and other mobile networks that compete with EE will be offered inferior deals on broadcast tower connection fees following an acquisition.
According to an anonymous source speaking to Business Week, Vodafone will request that Ofcom keeps an eye on BT's business practices in the event that it does buy EE.
However, while Ofcom can provide advice, it'll be down to the European Commission and the UK's Competition and Markets Authority to take action should Vofafone's fears be realised.
BT confirmed on Monday that it entered into an exclusivity agreement with Deutsche Telekom and Orange in relation to the possible acquisition of all of the operators' UK mobile business, EE.
"The period of exclusivity will last several weeks, allowing BT to complete its due diligence and for negotiations on a definitive agreement to be concluded," the telco said.
"The proposed acquisition would enable BT to accelerate its existing mobility strategy whereby customers will benefit from innovative, seamless services that combine the power of fibre broadband, WiFi and 4G."
If it all goes ahead, BT would own the UK's biggest 4G network, giving it greater control in terms of future investment and product innovation.
"While continuing these exclusive discussions, BT will progress its own plans for providing enhanced fixed-mobile converged services for businesses and consumers, in line with previous announcements," it added.
The terms, which are non-binding, include a purchase price of £12.5bn for EE on a debt and cash-free basis.
The consideration for EE will be payable as a combination of cash and new BT ordinary shares issued to Deutsche Telekom and Orange.
Following the transaction, Deutsche Telekom would hold a 12 percent stake in BT and would be entitled to appoint one member to the BT board of directors. Orange would hold a four percent stake.
The exclusivity agreement does not require the parties to enter into a transaction and there can be no assurances that one will occur, BT said.
If a transaction is agreed, approval by BT's shareholders will be required as a condition of the purchase.
Imran Choudhary, senior analyst at Kantar Worldpanel, believes that acquiring EE will give BT instant access to roughly one in three mobile customers in the UK who already use the EE network.
"BT already has an agreement with EE to use part of its network, so buying the whole network would provide a strong platform for BT to lead the telecoms sector in the UK," he said, explaining that consumers should see some benefits as others follow its lead with quad-play offers.
"Moving into the mobile market is a must for BT to defend its premium services which are increasingly threatened as other players enhance their triple- and quad-play offerings," he added.
Over the past few weeks, BT had been expected to make a decision on O2 or EE. The telecoms giant confirmed earlier this month that it was in talks to acquire one of the two companies, and it seems that the firm has gone with the bigger of the two.
The move makes sense for BT, which confirmed this year that it was plotting a return to the mobile market, as the investment will instantly make it one of the major players in the UK's mobile market.
The deal will also help BT to become a quad-play operator, able to offer phone, broadband, TV and mobile services to customers.
Talk of Three owner Hutchison picking up O2 were debunked, despite speculation last month that the firm was eyeing up the mobile operator. µ
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