BT Group’s takeover of EE Limited, Britain’s biggest mobile operator, has been cleared by the competition watchdog, after it dismissed fears the deal would stifle the market and increase customers’ bills. The landmark deal will create a telecoms behemoth that will provide mobile, fixed-line phones, broadband and TV to around 35m customers. The Competition and Markets Authority (CMA) approved the merger, which affects 31pc of UK mobile customers, on Friday after six months of deliberations.
BT will take control of EE as two of its competitors, O2 and Three, also plan to unite in a shake-up that could shrink the UK mobile market to just three network operators. The European Commission is investigating O2’s plans in a separate inquiry, with an outcome due in the spring. The BT-EE merger was unlikely to cause “significant harm to competition or the interests of consumers”, said John Wotton, chairman of the CMA inquiry.
“The retail mobile services market in the UK is competitive, with four main mobile providers and a substantial number of smaller operators,” he said.
“As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect. Similarly, EE is only a minor player in retail broadband, so again it is unlikely that the merger will have a significant effect in this market.”
The decision confirms the CMA’s provisional ruling in October.
Gavin Patterson, BT’s chief executive, hailed the decision as “great news”. “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,” he said.
“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 service.”
BT will now look to close the deal on January 29. After the merger, EE will become a separate line of business within BT and will be led by Marc Allera, currently EE’s chief commercial officer. Olaf Swantee, EE’s chief executive for the last four and a half years, confirmed earlier this month he would depart the company. Rival firms, including Vodafone and TalkTalk, had objected to the deal on the basis that consumers would face escalating bills if the merger went ahead.
“It’s a disappointing decision which will increase costs for all mobile customers,” said Dido Harding, TalkTalk’s chief executive.
“This entity will create a company that is more powerful than BT before its privatisation – it will have a huge market pressure and squeeze out smaller mobile companies.”
Rivals also claim the BT and EE merger will affect millions of consumers and businesses because of BT’s established dominance in the market.
BT’s Openreach division, for example, provides much of the UK’s broadband coverage through its oversight of the country’s cables and wires. Some rivals have called for Openreach to be spun off into a separate company.
Meanwhile, EE is one of the four mobile network operators – alongside Vodafone, O2 and Three – that sells capacity to other providers, such as GiffGaff and Tesco.
The CMA ruled today that the merger of the two giants would not harm competition in backhaul, wholesale mobile or wholesale broadband services. “A combined BT-EE would not have both the ability and the incentive to disadvantage competitors such that there would be significant harm to competition,” Mr Wotton said.He added that the CMA had listened to wider concerns about the sector and the role of Openreach. “There is also an ongoing Ofcom review into the sector and its future regulation, where such concerns may have more relevance,” he said.
Sharon White, the Ofcom chief executive, recently issued a warning against the “chill wind of consolidation” in the UK mobile market.
“We’ve basked for many years under the warm glow of vibrant competition,” she said in a speech last October, adding that it is a “cornerstone” of the regulator’s role to promote competition and ensure networks are available to a range of providers.
Andrea Coscelli, CMA’s director of mergers, said BT’s role as a wholesale supplier meant “there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market”.
“This will have a huge market pressure and squeeze out smaller mobile companies”
Dido Harding, TalkTalk chief executive
But in its preliminary findings the watchdog said the two firms were dominant in two separate areas – with BT providing broadband, voice and TV, and EE mobile communications – meaning there would be “limited overlap between.