A year after the proposed takeover was first announced, BT is set to complete its £12.5 billion takeover of EE after receiving the go-ahead from competition authorities who found no evidence that the retail and wholesale broadband and mobile markets would be negatively impacted.
For BT, the deal provides an opportunity to strengthen its quad-play credentials and facilitate the development of hybrid networks comprising fixed and mobile infrastructure. However some believe the new combined company will have too much power.
But how exactly will the merger of BT and EE impact the UK communications market?
“The combined BT and EE will be a digital champion for the UK, providing high levels of investment and driving innovation in a highly competitive market. I have no doubt that consumers, businesses and communities will benefit as we combine the power of fibre broadband with the convenience of leading edge mobile services. I look forward to welcoming EE into the BT family.”
“There can be no doubt as to the power over the UK consumer telecoms market BT EE now wields. Which is precisely why the wider industry has persistently urged the CMA not to rush ahead with this decision, but to take into consideration, and to fully explore their commonly held objections.
“Sky, for example has been at pains to point out that not only are there – in its opinion – ‘fundamental flaws’ in the economic analysis performed by the CMA, but that the CMA itself contains dissenting members who appear to share the view that the merger will prove a disaster for UK telecoms, and in turn for consumers.
“The CMA believes the new merged company is, by default, financially incentivised to continue to supply wholesale services to other providers (Virgin Mobile, for example runs on the EE Network), which will prevent it from closing its doors to third-party operators in an attempt to monopolise its own network infrastructure.
“The greatest concern for its competitors, then, is that, though unlikely – as the CMA points out – no firm measure has been put in place to actively prevent it.”
“To get those together seemed to me to suggest certainly significant consolidation in the market and reduction in the potential for effective competition.
“My concern, particularly on the wholesale issue, was that it wasn’t forward-looking enough so it looked at what we had now but it didn’t seem to be looking at what would be the situation in two, three, four years when we have had even more consolidation.
“I have a great deal of respect for the CMA, I hope they have done a detailed and broad analysis with the support of Ofcom as the sector regulator with the sector expertise.”
“Whilst no one was surprised by today’s announcement by the CMA, it does call into question just how the remaining mobile operators can realistically compete on a level playing field with BT/EE. As one of the only true independent alternative telecoms carriers operating in the UK, CityFibre is fast becoming the only viable alternative to BT for many of the UK’s leading mobile operators and business ISPs who share a fundamental concern of BT’s unhealthy dominance.”
“For the UK to respond to the significant demand for future proof communications infrastructure, it is crucial that we stimulate a vibrant competitive landscape to encourages investment from BT’s competitors, and is capable of sustaining economic growth and prosperity nationally.”
A challenge for BT’s mobile ambitions in the consumer market is its legacy association with fixed-line services. This could be particularly relevant for the youth market, unaware of BT’s previous mobile ventures. However, strong recent promotion of the fledgling BT Mobile offering is helping to address this.
A sensible approach could be to first offer BT products and services in selected EE stores and/or to use the EE brand name alongside BT Mobile’s marketing collateral. This would enable customers to begin to make an association between the two companies.
The deal paves the way for significant high-street rebranding. BT’s lack of retail presence is its Achilles heel, but converting EE shops will enable it to present and communicate bundles of mobile, broadband and TV face-to-face. This could give it a major boost as the UK market inexorably evolves towards multiplay.
On the enterprise side, BT might be better advised to rebrand more quickly given its already established strong presence in this sector. Indeed, the company might well end up taking a phased approach, that retains the EE name for longer in certain segments before withdrawing completely in the long-term.
“BT’s acquisition of EE is a clear strengthening of its mobile play, but it is also creating a much more rounded operator brand. BT’s fixed broadband assets, offering Wi-Fi and fixed-line connectivity, is supplemented by a nationwide offering of 4G access. For the company’s customers, this means access to its services will no longer be restricted by devices, method of connection or location.
“However, in some European markets, consolidation of this kind can result in less innovation in communication services, due to lack of operator competition. This could be bad for subscribers, who for years to come could continue receiving the same-old vanilla services – the operator itself could just become a bit-pipe for the innovation of third party apps. It would be great to see BT evaluate best-practices for modern service development through the integration of its new networks, allowing it to focus on the consumer.”
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Given that this means BT is going to control a very large section of the mobile business and also controls a large part of the infrastructure any competitors have to use to operate their service. this decision by the CMA is ill-informed and wrong, perhaps even negligent.
Perhaps if BT had to disinvest of openreach and its back haul network then fair enough, but as it stand BT is virtually monopolising the fixed and mobile space which can't be good for competition and the consumer.