BT's £12.5bn acquisition of EE approved by CMA

CMA claims BT takeover of EE won't cause 'significant harm' to competition or consumer interests

BT has been given the green light by the Competition and Markets Authority (CMA) to take over mobile operator EE.

The company agreed to buy EE, the UK's largest mobile operator in February last year, in a £12.5bn deal. But BT's rivals Sky, TalkTalk and Vodafone argued that such a combination would give BT too much financial muscle, and dominance in the telecoms market.

The CMA investigation focused on the risk that the merger would result in higher prices and/or fewer choices for consumers, Angelique Bret, a partner at law firm Pinsent Masons explained.

This risk, said Angelique Bret, a partner at law firm Pinsent Masons, would have been balanced against the merits of consolidation in terms of greater efficiency and the savings that could be wrung from economies of scale and, potentially, increased investment.

"In this case, BT and EE offered largely complementary services so that any direct overlap between them was limited. The CMA was apparently satisfied that concerns raised by mobile operators in relation to backhaul, and the risk of discrimination in favour of EE, were largely unfounded given the regulation of Openreach by Ofcom, and the existence of competing suppliers such as Virgin Media and mobile operators, which provide their own backhaul," she said.

John Wotton, the CMA's inquiry chair, said that the evidence did not show that the merger was likely to cause significant harm to competition or the interests of consumers.

He added that the merger wouldn't have a significant effect in terms of competition in the retail mobile services market, or in supplying services such as backhaul, wholesale mobile or wholesale broadband services.

"A combined BT-EE would not have both the ability and the incentive to disadvantage competitors such that there would be significant harm to competition," he said.

BT CEO Gavin Patterson said that the CMA's approval was "great news" for the telecoms giant. "We are pleased they have found there to be no significant lessening of competition following an in-depth investigation lasting more than 10 months," he said.

BT said that there will be a distinct EE line of business following completion of the acquisition, and that this would be led by EE's chief commercial officer, Marc Allera, who will become EE CEO as soon as the deal is completed. The firm did not comment on EE's current CEO, Olaf Swantee, suggesting that he may step down from his current role.

BT said that it would now start the formal process of completing the deal, stating that a prospectus would be issued in the week commencing 25 January, with the deal set to close on Friday 29 January.

When BT announced it wanted to acquire EE, it had a knock-on effect in the telecoms market, with Telefonica announcing that it would sell rival mobile network O2 to Hutchison Whampoa, which owns rival mobile operator Three, for £10.5bn. Meanwhile, BT's pay-TV rival Sky signed a deal with O2 to offer mobile phone services to UK customers in a wholesale contract.

Pinsent Mason's Bret believes that the O2-Hutchison Whampoa deal may have played a large part in the CMA's decision. "If the European Commission approves the Hutchison/Three and O2 merger, this combined entity will act as a constraint on any potential market power BT/EE might have in the mobile space," she said.