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.

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".

Recommended

The top funds to invest in
Funds

The top funds to invest in

Investors continue to favour passive funds in April though figures reveal an actively managed money market fund also caught their eye. We look at wher…
3 May 2023
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves takes a look at the companies with the highest dividend yields in the UK’s blue-chip index
20 Apr 2023
Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
28 Mar 2023
The outlook for Shell shares is mixed, despite bumper profits
Energy stocks

The outlook for Shell shares is mixed, despite bumper profits

With profits surging, it looks as if Shell is on a roll, but the company’s growth from here is hard to see as Rupert Hargreaves explains.
6 Feb 2023

Most Popular

Nationwide to give £100 cash boost to customers
Personal finance

Nationwide to give £100 cash boost to customers

Nationwide Building Society is giving customers £100 as it reinvests profits. Dubbed the Nationwide Fairer Share scheme, we look at who is eligible.
22 May 2023
Share tips of the week – 26 May
Investments

Share tips of the week – 26 May

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
25 May 2023
The best one-year fixed savings accounts - May 2023
Savings

The best one-year fixed savings accounts - May 2023

You can now earn 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the latest rates available now.
26 May 2023