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CMA provisionally clears BT EE merger

Article By: ,  Financial Analyst
October 28, 2015 4:36 PM

The Competition and Markets Authority (CMA) has provisionally cleared BT Group's purchase of the mobile phone network EE.

In February, BT announced that it was buying EE for £12.5 billion – but the purchase was subject to approval from industry watchdogs.

According to the CMA, the takeover was "not expected to result in a substantial lessening of competition in any market in the UK".

The BBC says the deal is set to create a communications giant, as BT will provide fixed-line phones, as well as broadband, mobile services and television. In addition, the takeover will treble BT's retail customers – the company currently has ten million customers, while EE has 24.5 million direct mobile subscribers.

Commenting on the decision, chair of the CMA inquiry John Wotton said: "​Having considered all the evidence, the group does not provisionally believe that, in a dynamic and evolving sector, it is more likely than not that BT/EE will be able to use its position to damage competition or the interests of consumers."

The CMA's ruling was based on the fact that the two firms operate in largely separate areas, "with BT strong in supplying fixed communications services (voice, broadband and pay TV), EE strong in supplying mobile communications services". It also said that there was "limited overlap" between the two firms in terms of categories of service.

Gavin Patterson, chief executive of BT was positive about the CMA's decision and said that the merger of the two companies would be good for the UK. He added that it would provide investment and ensure "consumers and businesses can benefit from further innovation in a highly competitive market".

BT Openreach

While the BT/EE deal has been given a green light, there's still a risk that BT may be forced to break up its broadband business, Openreach.

Ofcom is currently considering the situation. BT's rivals TalkTalk and Vodafone say that Openreach needs to be split apart to improve competition and provide better service. A final report on the matter is expected in January.

On Wednesday afternoon (October 28th), share prices in BT were up 3.14 per cent to 466.15.

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