Competition and Markets Authority Start Review of BT’s £12.5bn EE Gobble

The Competition and Markets Authority (CMA) has launched their “preliminary invitation to comment” on BT’s £12.5bn move to buy mobile operator EE, which will turn them into the United Kingdom’s biggest quad-play telecoms giant. Meanwhile rivals are demanding Dark Fibre access and other concessions.

BT confirmed in February 2015 that a deal had finally been agreed (here), although the transaction itself was still subject to approval by the operators shareholders and clearance by the relevant regulatory and competition authorities. At the time BT hinted that the process was expected to close by March 2016.

BT Statement (FT)

“We are pleased the CMA has begun to ask industry for its views. This was always going to be part of the process, and we welcome the fact that industry is being given an early opportunity to provide comments. We believe the proposed acquisition will be positive for consumers, businesses and the UK, with BT creating a world-class digital infrastructure for Britain.”

Assuming the deal does complete then Orange, which is currently one of EE’s joint parents, will hold a 4% stake in the new business (plus around £3.4bn in cash) and the operators other parent, Deutsche Telecom, will hold 12% (plus a seat on the board).

However rivals, particularly mobile operators like O2, Three UK and Vodafone, are concerned and not least with regards to BT being both a major supplier of fixed line and now mobile services. Rivals that don’t have the same combined infrastructure luxury might well feel disadvantaged and some are calling for the CMA to force BT into offering Dark Fibre access (i.e. fibre optic cables that have been laid, but which are not yet fully utilised), most likely at an Ofcom regulated price.

Funnily enough Ofcom’s Business Connectivity Market Review 2016 (here) is currently considering the same sort of approach, although historically the regulator has tended to reject such proposals as being both risky and unnecessary. Never the less the changing market could require some adjustment and this might just be one of those options, although BT is certain to resist.

No doubt we’ll be hearing more about all of this as the year progresses. The CMA is reportedly taking feedback on the matter, albeit only until 18th March, which seems like rather a short window.