1,914BT has agreed definitive terms to acquire EE for £12.5bn.
The combination of EE and BT promises to provide customers services that combine the power of fibre broadband with wi-fi and advanced mobile capabilities. Integrating the two companies will accelerate BT’s mobility strategy and increase BT’s capacity for future investment and product innovation.
EE is currently the leading mobile network operator in the UK with 31m customers of which 24.5m are direct mobile customers and 834,000 are fixed broadband customers. It has the largest 4G customer base of any operator in Europe.
The consideration for EE will be payable as a combination of cash and new BT ordinary shares issued to both Deutsche Telekom and Orange. It will be financed by a combination of new debt financing and approximately £1bn from the placing of new BT shares. The Equity Placing will be launched in due course.
Following the Transaction and Equity Placing, Deutsche Telekom will hold a 12% stake in BT and will be entitled to appoint one non-executive member of the BT Board of Directors. Orange will hold a 4% stake in BT.
Through the takeover, BT expects to achieve combined operating cost and capex synergies of around £360m p.a. in the fourth full year post Completion. This is equivalent to a net present value of around £3.5bn before integration costs or around £3.0bn after integration costs.
BT expects to generate revenue by providing a full range of communications services to the combined customer base. This includes BT selling its broadband, fixed telephony and pay-TV services to those EE customers who do not currently take a service from BT. BT also expects to accelerate the sale of converged fixed-mobile services to BT’s existing consumer and business customers and offer new services, using both companies’ product portfolios, skills and networks. BT expects to generate revenue with a total net present value of approximately £1.6bn.
BT Chief Executive Gavin Patterson said:
“This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UK’s leading 4G network will now dovetail with the UK’s biggest fibre network, helping to create the leading converged communications provider in the UK. Consumers and businesses will benefit from new products and services as well as from increased investment and innovation. The deal provides an attractive opportunity for BT to generate considerable value for shareholders, with significant operating and capital investment efficiencies supported by our tried and tested cost transformation activities. The enlarged BT will offer significant opportunities for employees as we lead the creation of a world-class digital infrastructure for Britain.”
EE Chief Executive Olaf Swantee said:
“Joining BT represents an exciting next stage for our company, customers, and people. In the last few years alone, we have built the UK’s biggest, fastest and best 4G network, significantly advancing the digital communications infrastructure for people and businesses across Britain. Today’s announcement will ensure the UK remains at the forefront of the mobile revolution, bringing even more innovation and investment in world leading connectivity for our customers.”
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