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BT must make mobile plans clear to get authorities’ backing for EE deal

Wednesday, May 6th 2015 by Ellen Branagh

BT will have to explain its plans for EE before regulators give the proposed buyout the green light, according to one analyst.

Oliver Johnson, from Point Topic, told Cable.co.uk that BT’s takeover of the UK’s biggest mobile network comes at a time when mobile operators are struggling, particularly on the infrastructure side.

“Increasingly they’ve been divesting themselves of sole ownership of the physical bits and pieces to cut back to what they really want which is the spectrum license and the customer,” he said.

“They can’t maintain their margins and a nationwide infrastructure."

Divesting occurs when a business reduces the assets that it holds, and is often done to help reduce the concerns of regulators over anti-competitive practices or unfair dominance by one company in a particular sector.

Mr Johnson continued: “The way that BT and EE propose to handle the various deals and competitive situations that would be generated in the mobile infrastructure space if and when they get together is going to be the core of their submission to the competition authorities.”

It is thought that BT could make its submission to the Competition and Markets Authority (CMA) this week after shareholders gave its takeover of EE the go-ahead.

The telecoms giant announced last week that shareholders voted 99.55% in favour of the £12.5bn acquisition of the mobile operator

If approved by regulators, the purchase of EE will see BT become the UK's biggest fixed line and mobile operator, adding an additional 24.5m customers.

Revealing a timeline for the proposed purchase in a presentation at last week’s BT Group general meeting, chief executive Gavin Patterson said the company aims to complete the deal by 30 September – if the purchase receives the approval of the CMA.

The CMA, a non-ministerial government department, will decide if the proposed purchase introduces the risk of any anti-competitive practices within the telecoms sector. If it decides a more detailed review is required, the completion of the deal could be delayed until March 2016.

'Well placed for 5G'

But Mr Johnson said he thought the deal could move swiftly.

“Overall though I think that the nature of the UK market and the competition in the mobile sector would mean this deal could go ahead reasonably quickly,” he said, “more so if BT address some of the questions on 4G spectrum ownership.

“Any decisions could also be coloured by the expectation of more deals in the mobile space in the coming quarters.

“Effectively we seem to be at the stage of either accepting these mergers and putting up with potential anti-competitive downsides in order to have a healthy 4G market and to be well placed for 5G when it emerges, or banging the competition drum at the expense of companies with margin (and investment potential)."

There are unlikely to be competition questions on the "fixed side" since EE does not bring anything "market shifting" to the table, he added.

BT is likely to argue that its purchase of EE can only benefit customers, who will benefit from lower prices of ‘quad play’ bundles including broadband, home phone, mobile and TV.

Rivals have voiced concerns that the company’s power will only increase if it gains control of the UK’s biggest mobile operator.

The EE takeover could lead to BT having to make certain concessions, analyst John Delaney previously said.

When the proposed deal was first announced Mr Delaney, a mobile analyst from IDC, told Cable.co.uk that any deal to buy EE would most likely result in BT having to divest some of its mobile frequency spectrum.

Business as usual

Mobile providers pay the government for the right to transmit signals on different parts of the electromagnetic spectrum. BT and EE both already own rights to different parts of that spectrum.

“Looking at patterns of mobile acquisition across Europe over the past few years one of the things that tends to be required by regulators is some divesting of spectrum,” Mr Delaney said.

He said there would probably be other concessions, but predicted that the deal would “get through eventually”.

Yesterday, it was also announced that O2 has bought mobile advertising business Weve outright from EE and Vodafone.

The three operators joined forces to set up the business in 2013, aimed at targeting advertising based on data collected from their mobile customers.

The operators initially invested a joint £40 million to set up Weve in 2013 to collect data from more than 20 million mobile customers on their networks, allowing them to target advertising to specific groups.

In a statement on its website, Weve said: "We wanted to officially let you know that O2 have bought the Weve business outright from EE and Vodafone. Whilst exact details are to be worked through, for those of you that work with us, business is very much as usual."

While it previously had 22m customers across three shareholders, it will now have access to more than 31m, thanks to things like getting access to O2 wi-fi users.

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