BT’s £12.5bn takeover of mobile group EE has been provisionally cleared by the Competition and Markets Authority, which decided the deal is not “expected to result in a substantial lessening of competition”.
Rivals had argued that the takeover would create a dominant fixed-line and mobile company. BT is the UK’s biggest supplier of broadband, while EE is the country’s largest mobile operator, on track to have 14m customers by the end of the year.
But John Wotton, chair of the CMA’s inquiry, said: “After a detailed investigation, our provisional view is that these concerns will not translate into a competition problem in practice.”
The CMA said that the British retail mobile market would remain competitive, despite the merger of BT and EE, “with four main mobile providers and a substantial number of smaller operators”.
BT’s shares rose 4.7 per cent on the news, while shares in smaller rival TalkTalk fell 5 per cent.
BT has a small mobile business, distinguishing the deal from the proposed tie-up of Hutchison Whampoa’s acquisition of Telefonica’s O2, which is awaiting clearance from the European Commission. The combination of Hutchinson’s Three network and O2 would create a company that would leapfrog EE to become the UK’s biggest mobile operator with 31m customers.
Gavin Patterson, BT’s chief executive, welcomed the decision, saying the merger would increase investment and innovation.
But TalkTalk said it was “concerned” by the findings, noting that the watchdog was “divided over its findings in wholesale mobile”.
Kester Mann, an analyst at CCS Insight, said the fact that BT will not be required to make any changes to its offer to soothe competition concerns was a “particular victory for the company”.
But he added that the approval would add weight to calls by rivals for a structural separation of Openreach, its fixed-line broadband network which provides services to rivals as well as BT’s retail operation. The issue is being considered as part of a review of the UK’s digital economy by Ofcom, the telecoms regulator.
BT’s return to mobile telecoms, 14 years after it spun off its mobile arm O2, is the latest example of the increasing convergence between different telecoms services.
Two of its major broadband competitors, Virgin Media and TalkTalk, offer “quadplay” packages of fixed-line, broadband, mobile and television service. The third, Sky, is set to launch a quadplay offering next year.
In June, the CMA granted BT a fast-track process that allowed it to skip some of the initial phases of work, and instead move forward to the more detailed probe that assessed the deal. Announcing its provisional findings on Wednesday, it said it was aware of concerns about the role of BT’s broadband network Openreach, whose role is currently being reviewed by Ofcom.
This month Ofcom’s chief executive Sharon White expressed doubts about telecoms mergers, saying that there was “no relationship [with higher] investment”.
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