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BT to Buy EE: Impacts for UK's Mobile Sector

by Philip Kendall | 12月 16, 2014

Yesterday's announcement that BT is now in exclusive talks with DT and Orange to acquire EE, will leave the UK's other mobile operators evaluating their strategies. In our report last month, BT to Buy its Way to Top Spot in UK Mobile?, we suggested that an acquisition of O2 would be more likely - easier for BT to digest and a keener seller in Telefonica. By pulling O2 into the quad-play space, it would also have had wider implications on service bundling in the UK. Instead, a combination of BT and EE will involve slightly more integration challenges - the new entity's increased dominance of spectrum holdings may require some divestment, while the new EE TV service is ikely to disappear.

By acquiring EE, BT will be taking a rising multi-play competitor out of the market and, to a certain extent, Vodafone and Three may breathe a sigh of relief - it reorganises the quad-play landscape rather than accelerates it. Vodafone may feel its plans to offer quad-play services next year are still sufficient to compete (see Vodafone to Expand Services in UK Makret Bringing More Multiplay Options), though industry talk of Vodafone's interest in Liberty Global, which owns Virgin Media in the UK, would certainly boost its profile in this domain. Three has remained one of the stronger mobile-only proponents in the market and in theory, the new market structure will not leave it completely isolated as a BT acquisition of O2 would have. But we would not rule out Three acquiring O2, with BT's move unlikely to be the end game for the market.

What this deal does bring into focus is the challenging situation Europe's telcos find themselves in. With service revenue declining, consolidating business priorities back onto key market is the order of the day and there are deals to be made. With in-market consolidation in process or looking likely in markets such as the Nordics, France and Italy, the number of mobile operators per country is on the decline. Perhaps in a couple of years' time, when the European economic situation improves, we may see a further round of cross-market consolidation too as some of these more focused regional players launch a new wave of expansion.

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