BT is set to swallow EE

Telecoms giant BT is in takeover talks with mobile provider EE - a purchase which would break its own record.

Telecoms giant BT is in exclusive talks with mobile provider EE. It is set to buy the company for around £12.5bn, which would be a record purchase for the former state monopoly. BT had also considered buying Telefonica's O2, which was previously known as Cellnet.

BT itself was forced to spin off Cellnet in 2001 in order to pay down the telecoms' bubble-induced debt. The deal announced this week would see EE's owners Deutsche Telekom and Orange take small stakes in BT.

What the commentators said

BT is paying around eight times operating earnings. That compares well with similar deals. Verizon paid nine times for the 45% of Verizon Wireless that was still available.

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EE was chosen because it has more customers and has invested heavily in 4G. BT wants to be able to provide the fastest mobile internet to complement its fibre-broadband offering, said Daniel Thomas in the FT.

It is now in a position to offer "quad-play": landline and mobile phone connections, along with TV and broadband, all in one package. These have done well in Europe and the US.

But will they do well here? CEO Gavin Patterson has yet to prove that the British will go for quad-play. Its success elsewhere is a result of "defensive offerings", says Chris Blackhurst in the Evening Standard: price-cutting bundles to prevent customers switching to cheaper alternatives.

"There is no evidence" that we particularly want to group all four services together. Indeed not, said James Moore in The Independent. Quad-play has been available for seven years with Virgin Media. "It doesn't appear to have had a massive impact." And most people have several contracts with varying expiry dates.

The hassle of changing all these "adds to the inertia" BT will need to confront. Quad-play does at least mean there is just one place to complain to when you're unhappy. Still, "given that most providers turn a tin ear to their customers that doesn't necessarily count for much".

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.