BT Group in exclusive talks to buy UK mobile phone network EE for £12.5 bn

British Telecom giant BT Group Plc, is in exclusive talks with Orange and Deutsche Telekom to buy EE (earlier known as Everything Everywhere) mobile phone network in the UK, for £12.5 billion ($19.6 billion).

BT yesterday said that the ''period of exclusivity will last several weeks allowing it to complete its due diligence and for negotiations on a definitive agreement to be concluded,'' and added that the exclusivity agreement does not require the parties to enter into a transaction and there can be no assurances that a deal would occur.

Under the non-binding agreement, BT has offered to pay £12.5 billion for EE on a debt / cash-free basis. The consideration will be paid in a combination of cash and new BT ordinary shares issued to both Deutsche Telekom and Orange.

Following the transaction, Deutsche Telekom would hold a 12-per cent stake in BT and would be entitled to appoint one member of the BT board, while Orange would hold a 4-per cent stake in BT.

BT, which is planning to re-enter the mobile network business, was until last week looking to buy either EE or O2 from Spanish owner Telefonica. Both EE and O2 are the biggest mobile operators in the UK.

The London-based company had been in talks with O2 since last month and later on entered into talks with EE in order to clinch a deal with at least one of them to enable it to re-enter into the consumer mobile market. (See: After O2, BT in talks to buy mobile phone operator EE)

EE, the bigger of the two, has 24.5 million direct mobile customers and holds a 33.8-per cent market share, while O2 has over 23 million customers giving it a market share of 26.2 per cent. Moreover, EE has the biggest 4G subscriber base in Europe with 5.6 million users.

Orange and Deutsche Telekom merged their UK mobile phone network businesses in 2010 to form EE, and became the first digital communications company in the UK to offer super-fast 4G mobile services on fibre broadband.

EE spent £1.5 billion over three years to roll out super-fast 4G mobile services covering 85 towns and cities, aimed at reaching 98 per cent of the UK population by the end of 2014.

It has already spent £15 billion since 2000, building the UK's biggest 3G mobile network, while its fixed fibre broadband service now covers 15 million households.

A return to the mobile phone network would make BT a dominant player in the UK telecoms sector since it already holds spectrum and provides multi-play packages of fixed line and mobile broadband and pay-TV services.

Meanwhile, The Independent yesterday reported that BT shareholders had welcomed a possible deal that would give the company scale as it competed in quad play - broadband, home phone, TV and mobile.

According to the reports, rivals Vodafone, Sky and Virgin were expected to urge regulators to challenge the deal.