BT in Talks to Buy EE for £12.5bn

BT Sevenoaks workstyle buildingBT has entered exclusive negotiations with Deutsche Telekom and Orange to buy their UK mobile business, EE, for £12.5bn. BT said the period of exclusivity will last several weeks, allowing it to complete its due diligence and for negotiations on a definitive agreement to be concluded.

The news comes three weeks after BT revealed that it was considering buying either EE, or alternatively, Telefonica’s O2.

If the deal goes through, Deutsche Telekom would hold a 12 per cent stake in BT and would be entitled to appoint one member of the BT Board, while Orange would take a 4 per cent stake in BT.

BT said it expects significant synergies, mainly through network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs. In addition, it said it expects to generate revenue synergies through selling fixed-line services to those EE customers who do not currently take a service from BT, and by accelerating the sale of converged fixed-mobile services to BT’s existing consumer and business customers.

EE is the UKs largest mobile network, with 24.5m direct mobile customers (including contract and pre-paid), ahead of O2, which has 22m, and Vodafone, which has 19m. In its most recent financial results, EE reported Adjusted EBITDA of £1.59bn for the 12 months to 30 June 2014.