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

Monday, March 16th, 2015 (7:52 pm) - Score 908

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.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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20 Responses
  1. Avatar Ethel Prunehat says:

    Divestiture of Openreach should be the minimum requirement.

    1. Avatar GNewton says:

      And the BDUK should be immediately scrapped, there has never been any need to give taxpayer’s money to BT, as is evident from this latest news story!

    2. Avatar FibreFred says:

      lol yes of course, they’ll stop BDUK because BT are looking to buy BT.

  2. Avatar FibreFred says:

    Or EE even.. (still early) 🙂

  3. Avatar tonyp says:

    Will other BB operators ask the CMA/Ofcom for access to Liberty Global’s (Virgin) and other Fibre Companies’ (e.g Gigaclear) dark fibres as well as Openreach’s for a level playing field? To me, it seems the mobile operators 3, VF and O2, with their deep pockets have not shown much interest in providing their own landline networks (apart from backhaul I suppose) until EE has the promise of being gulped by cash rich BT. I think all mobile operators should have recouped the vast sums spent bidding for the 3G bandwidth by now. Whilst market consolidation is perhaps no bad thing, these megacorporations could well show monopolistic and/or cartel practices to the overall detriment to the marketplace.

    Bring back Professor Carsberg who skilfully steered Oftel during the early years of competition after the C&W in 1981 (now part of Vodafone) and BT in 1984 privatisations! We need a strong personality and not the wishy-washy regulators with seconded staff from the private sector.

    1. Avatar FibreFred says:

      Level playing field?

      We can’t have that no… Surely TT/Sky/Virgin etc should all have access to BT asset/infrastructure without giving anything back

      That’s sounds like what the ask is anyway….

    2. Avatar TheFacts says:

      Instead of seconded staff from the private sector they should use civil servants who have never worked in the real world.

    3. Avatar tonyp says:

      @FibreFred, I didn’t mean dark fibre capacity should be free to others, just leased capacity at wholesale prices.

      I also take your point about buying with shares. I have to say though that is a lot like printing money as the market has to buy those new shares. This could well dilute the share price and reduce dividends if business doesn’t go as well as expected and there could be trouble ahead for pension funds etc whose shares are worth less. But then the ‘market’ always finds wheezes to magic money from nowhere!

      @TheFacts, I think you are unfair on the majority of Civil Servants who are qualified in technologies of their department as well as having to serve political masters. Many Civil servants have worked in industry but wish to give their skills to public service. Seconded personnel are effectively consultants who may not be as impartial as we would wish. In my opinion, its the senior CS appointees that can make or break a department’s purpose.

  4. Avatar c hughes says:

    How come BT have £12.5 billion to buy EE but not to deploy FTTP

    1. Avatar DTMark says:

      In part because BT can’t game the taxpayer to get them to buy EE for them.

    2. Avatar FibreFred says:

      Q: C hughes, are they using cash to buy EE?
      A: No, mostly share’s….

      They don’t “have” 12.5 billion to spend

    3. Avatar fastman2 says:

      why on earth would you spend that money on FTTP — no return on that in any shape or form — the Playback on FTTC for bDUk is around 12 – 15 years so what do you think thet payback on FTTP network — 90% of the problems are beteen either cab and dp and dp and premise – you look at virgin they are only extending their network by 100 metres nationally and thats going to cost 4 bn and take 4 years

    4. Avatar GNewton says:

      “How come BT have £12.5 billion to buy EE but not to deploy FTTP”

      This is a valid question and one reason why BT shouldn’t receive taxpayer’s money, it has no need for it.

    5. Avatar AndyH says:

      BT do not have £12.5bn in cash.

  5. Avatar FibreFred says:

    “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.”

    This the bit I don’t get really. If others feel disadvantaged in this area then step up and invest and bring into play what is missing?

    Why would you pull down a competitor? Wouldn’t it make more sense to invest than stifle?

    It’s like Asda complaining about Tesco having a larger fleet of delivery trucks and they feel disadvantaged so want access to some of their trucks

    1. Avatar DTMark says:

      I don’t recall the government giving taxpayer’s money to Tesco to fund their store-building programmes nor do I remember it paying for TV advertisements for them.

      Nor Tesco being given an effective monopoly as a direct result of government action, nor being placed in a position of some luxury as regards infrastructure by being able to buy previously taxpayer built-and-owned infrastructure which could never sensibly be replicated by the private sector most especially in the current tax and regulatory environment.

      Nor is the taxpayer ultimately liable for Tesco’s pension scheme.

      Those are some of the key differences.

    2. Avatar Paul says:

      Well thought out response DTMark

    3. Avatar FibreFred says:

      Government funding has nothing to do with this take over, BT bid for BDUK like others and won, it has no bearing on this acquisition

      Oh god… 30+yrs on and people are still going on about the infrastructure the taxpayer built

      It was sold

      SOLD!

      When will you and others get that and stop talking about it? When doesn’t it become an issue, 50 yrs, 100yrs when? They bought it they own it, the government got the money for it, the taxpayer didn’t get anything back so chase the government for your money back

      The dark fibres in the ground didn’t exist 30yrs+ ago

      None of your “differences” have anything to do with this deal

    4. Avatar Paul says:

      He is clearly referring to government investment today rather than what happened with BT 30+ years ago. The Asda Vs Tesco compares and explanations are also valid as to be fair fred it was you that compared Asda and Tesco in the first instance. He simply pointed out why your comparison has no merit.

    5. Avatar GNewton says:

      @Paul: There are still some BT trolls out here who honestly believe that this company did a great job, and that there was a genuine BDUK tender. They are too blind to see the BDUK farce, and the waste of taxpayer’s money here.

      DTMark is spot on with his explanation, BT is a not a genuine commercial entity, if it was, it wouldn’t burden the taxpayer with its dubious pension guarantees and telecom rollouts via BDUK. It’s a monopoly for many areas, and abusive as such, with well known poor customer services and a ‘Can’t Do’ laziness attitude, just take a look at its business forum at https://business.forums.bt.com/t5/Feedback-general-chat/bd-p/Intros

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