BT in talks to buy mobile networks EE or O2

25/11/2014

BT is in talks to buy either EE or 02, as UK telecom firm looks to move into quad-play as consumers seek to buy all four services – home broadband, home phone, mobile and pay-TV – from one provider.

Analysts said BT was “in the driver’s seat” as O2 and EE, which are each valued at about £10bn, have made separate, rival approaches.

Such a deal could see the foreign owners of the mobile networks taking a 20 per cent stake in BT in return for selling their UK arms.

In 2002, BT spun off O2, then called BT Cellnet. In 2005 it was acquired by Spain's Telefonica for £17.7bn.

BT said it had also been approached by the owners of another network, believed to be EE, about a UK buy-out.

Its value is around half that paid by Telefonica. Deutsche Bank values O2 UK at £9bn, while UBS values it at £9.6bn.

EE's owners - France's Orange and Germany's Deutsche Telekom - put plans for an initial public offering of EE on hold this year. They said recently that their strategies in the UK would depend in part on how aggressively BT went into mobile.
"This could be the moment that commitment to the UK mobile market finally cracks and we see parent companies starting to exit," Citigroup analysts said in a note, adding that UK profit margins were very low compared with other markets.

A takeover of either O2 or EE would create a communications giant covering fixed-line phones, broadband, mobile and TV.

According to Citigroup, EE holds 33.8% of the UK mobile market by revenue, and O2 some 26.2%.

BT has about a third of the home broadband market. Analysts suggest that customers
increasingly want to buy their fixed-line and mobile services from one company.

BT's TV channel BT Sport is engaged in a viewership battle with Sky, as it tries to lure broadband customers with Premier League broadcasts, and it has also bought the rights to Uefa Champions League games.

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