BT Shareholders Approve GBP12.5bn Acquisition of Mobile Operator EE

In an entirely unsurprising development the shareholders of BT have today voted in favour of the operators £12.5bn move to buy mobile operator EE from current owners Deutsche Telekom (Germany) and Orange (France), although the final regulatory approval will take a lot longer to achieve and may extract concessions.

As a quick recap, BT “agreed definitive” terms with EE’s parent operators in February 2015 (here) and so began the long road to completion. BT’s Board believes that the acquisition, which will turn the operator into a quad-play giant (broadband, phone, TV and mobile), could generate considerable value for shareholders (e.g. revenue synergies).

The enlarged group is also anticipated to have approximately 100,000 employees and, assuming the deal does complete, then Orange 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). Check the full summary of financial details for more.

The fact that EE is predominantly a mobile operator means that there will be little overlap between them and BT’s current fixed line focused telecoms network, with BT predicting a bid advantage from the cost savings and performance boost of being able to build the two into a “single, seamless, converged platform, supported by a single IP network, that is able to serve customers with no distinction between fixed and mobile“.

Indeed BT has already launched their consumer focused BTMobile service (here), although this is still based off their earlier Mobile Virtual Network Operator (MVNO) deal with EE and thus true convergence cannot be achieved until the current acquisition process is completed. It’s predicted that this will be completed before the end of BT’s 2015/16 financial year (31st March 2016).

Today thus represents an important milestone in this process with BT Group plc’s shareholders, most of which had gathered for a 10am General Meeting at Old Billingsgate in London, voting in favour of the acquisition and its related matters.

Indeed the vote itself is largely a formality because BT sources have confirmed that 99.55% of the proxy form votes, which were returned prior to the meeting, have given their support to the move and those represent the vast majority shareholder voting power.

Today’s Voting Results

Resolution 1 (99.73% in Favour)
Approve the proposed acquisition of EE and grant the directors related authority to allot shares

Resolution 2 (99.77% in Favour)
Approve the buy-back of BT shares from Deutsche Telekom and/or Orange

But having shareholders support the move is considerably easier than getting the deal past the relevant regulatory and competition authorities. The Competition and Markets Authority (CMA) has already started their preliminary investigation (here) and they will need to consider rivals, many of which are concerned about BT becoming both the biggest fixed line and mobile operator in the United Kingdom.

The combined strength of those two aspects gives BT a significant ability to potentially undercut some of those rivals with more affordable and or capable quad-play bundles, which worries established operators like Vodafone, Three UK, O2, Sky Broadband and others. Ofcom also won’t like the fact that the UK mobile market will soon be reduced to just three primary operators (they’ve previously expressed a desire for more and not less).

Many of BT/EE’s rivals don’t have the same kind of combined infrastructure luxury and some are thus calling for the CMA to force BT into offering Dark Fibre access at an Ofcom regulated price (i.e. fibre optic cables that have been laid, but which are not yet fully utilised); among other potential concessions. Suffice to say there’s a long way to go yet and BT knows that getting the CMA’s approval will be the hardest part.