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Competition watchdog begins in-depth probe into BT/EE takeover

Tuesday, June 9th 2015 by Ellen Branagh

BT’s planned buyout of mobile network EE has been fast-tracked to an in-depth investigation by the UK’s competition watchdog.

The Competition and Markets Authority (CMA) announced today that it has referred BT Group’s proposed £12.5bn acquisition of the UK’s biggest mobile network to an “in-depth phase 2 investigation”.

In a joint submission BT and EE previously asked the CMA, which started phase 1 of its investigation on 18 May, to fast-track to the second phase of the process.

The competition regulator said the planned deal has been fast-tracked because it threatens to reduce competition in both the fixed broadband and mobile markets.

In particular, the CMA is concerned about the impact the merger will have on wholesale access to Mobile Virtual Network Operators (MVNOs) and access to fibre infrastructure to mobile operators.

As well as selling directly to customers, BT also provides services to other communications providers, including backhaul services to mobile providers such as EE, O2, Three and Vodafone.

The company’s buyout of EE would make it the UK’s largest fixed line and mobile provider, sparking concerns from rivals that it will reduce competition.

The CMA said competition concerns were raised during the preliminary consultation, including the impact of the merger on the retail mobile market in the UK.

But it said the criteria to fast-track it were met based on the issues of wholesale access and fibre backhaul, so it was not necessary for it to reach a conclusion in the first phase relating to other concerns.

Third parties will be able to present their views on the merger during the phase 2 investigation, which will be overseen by a group of independent panel members, it said.

'A real risk'

Andrea Coscelli, CMA executive director of markets and mergers and decision-maker in this case, said: “BT and EE are leading suppliers of UK telecommunications services and together they will have a strong presence in many telecommunications markets.

“They also supply important inputs at the wholesale level, which enable other communications providers to compete at the retail level in the provision of mobile services.

“We have found that 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.”

He said BT and EE had recognised that the issues in the case were complex and so had requested the fast track procedure, adding: “after due consideration, we believe this to be appropriate”.

Last month, BT Group CEO Gavin Patterson said the company’s planned takeover of EE would be good for consumers.

Mr Patterson said the acquisition, which has been given a thumbs-up by BT shareholders, would allow the telecoms giant to “invest and innovate even more than now”.

BT is looking to complete the deal by March 2016 but can only do so if it is approved by the CMA.

The company says rather than reduce competition in either the fixed broadband or mobile markets, it will enhance competition with the number of UK mobile network operators remaining at four.

It says the ability of its rivals to compete by using the network operated by Openreach will be unaffected while consumers will have more choice because BT will be able to offer bundled broadband, TV, landline and mobile services.

The move would see BT join the likes of Virgin Media, TalkTalk and Sky as a ‘quad play’ provider – a company which can offer consumers internet, TV, fixed line and mobile phone services in one place.

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