CMA Provisionally Approves BT’s £12.5bn EE Takeover

BT’s proposed £12.5 billion takeover of EE looks likely to go ahead after the Competition and Markets Authority (CMA) gave its provisional approval without any remedies, stating the deal is not expected to reduce competition in any market.

The CMA launched its investigation earlier this year to see whether areas such as the mobile, broadband, landline and television markets might be affected to the detriment of consumers and whether the wholesale broadband, backhaul and mobile virtual network operator (MVNO) spaces would be distorted for other communications providers and their customers.

Provisional approval

Of the ten ‘issues of concern’ published in July, the inquiry group was ‘unanimous’ that nine were not to be feared but was divided over the MVNO market. However given a two-thirds majority is needed for any decision, the CMA says it is not a concern.

A final decision will be made in January 2016, allowing opponents to consider the CMA’s provisional findings.

“We provisionally think that the retail mobile market in the UK, with 4 main mobile providers and a substantial number of smaller operators, is competitive,” said John Wotton, inquiry chair. “As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect on competition. By the same token, it is unlikely that the merger will have a significant effect on competition in the retail broadband market, where EE is only a minor player.

“We have also been looking at the ways in which, as a merged company, BT/EE might try to disadvantage competitors which it supplied with services such as backhaul, wholesale mobile or wholesale broadband services. We have provisionally found that in some areas it is unlikely that they would have both the ability and incentive to do so – and in others that the effects of their attempting to do so would be limited.”

BT plans

BT has been without its own mobile operator since the sale of O2 to Telefonica in 2005, but has offered business mobile services for some time through MVNO agreements and now offers consumer 4G deals through its current arrangement with EE.

It wants to be able to bundle services to both BT and EE customers and to use EE’s infrastructure to develop converged fixed and mobile networks that provide ubiquitous connectivity. Both BT CEO Gavin Patterson and EE CEO Olaf Swantee have recently shared insights into how this future network will serve businesses and consumers.

“We’re pleased that the CMA has provisionally approved BT’s acquisition of EE,” said Patterson. “The combined BT and EE will be good for the UK, providing investment and ensuring consumers and businesses can benefit from further innovation in a highly competitive market.”

Other deals

The CMA’s decision is not a major surprise given Ofcom said it had not major concerns with the deal earlier this year. In contrast, the regulator is worried about the impact of the separate O2-Three merger, with Ofcom CEO Sharon White expressing fears mobile prices might rise if it goes ahead.

“Of course the more challenging transaction to win regulatory approval will be that of Three/O2,” explained Matthew Howett, practice leader, regulation at Ovum.  “Across Europe the sentiment for greater industry consolidation has waned following suspected price increases in markets where the number of mobile players fell from 4 to 3, and where as a result of the changing of the guard at the EU competition authority, a higher bar has been set to win the necessary approval.”

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