After O2, BT in talks to buy mobile phone operator EE

British telecom giant BT Group Plc is in talks to buy EE (earlier known as Everything Everywhere) mobile phone network in the UK from its joint venture partners Orange of France and Deutsche Telekom of Germany.

Orange and Deutsche Telekom yesterday said in a release that they were in "exploratory discussions" with BT and added that it was "too early to state whether any transaction may occur".

The news comes just days after BT revealed that it was in talks with Spain's Telefonica to acquire its O2 mobile network in the UK as part of its recent strategy to re-enter the mobile network business. (See: BT Group in talks to buy O2 mobile network from Telefonica for $7.5 bn)

BT, which is planning to re-enter the mobile network business, is looking to buy O2 or EE, both of whom are the biggest mobile operators in the UK.

EE, the bigger of the two, has over 27 million subscribers 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.

While it would cost BT around €10 billion to buy EE, it would cost around €9 billion to acquire O2.

Orange and Deutsche Telekom merged their UK mobile phone network businesses in 2010 to form EE, which is 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.

O2, then known as Cellnet, was formed as a 60:40 joint venture in 1985 between BT and British telecom company Securicor. BT acquired Securicor's 40-per cent stake in Cellnet in 1999 and renamed it BT Cellnet and later changed it to O2.

O2 runs 2G, 3G and 4G networks across the UK, as well as O2 Wifi and owns half of Tesco Mobile. It has over 450 retail stores, over 23 million customers and holds 26.2 per cent market share.

A successful deal would bring O2 back to BT's fold after the London-based company sold it to Telefonica in 2006 for £18 billion as part of its restructuring.

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.