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Regulator approves BT, EE merger

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The UK Competition & Markets Authority (CMA) has given unconditional approval for fixed-line incumbent BT to acquire the UK’s largest mobile operator, EE.
At the end of its year-long examination of the deal, the CMA concluded: “The evidence does not show that this merger is likely to cause significant harm to competition or the interests of consumers.”
John Delaney, associate vice-president: mobility at IDC Europe, comments on the deal.
It is likely that BT will now move quickly to close the deal. One question that is receiving a lot of attention is what the merged company will be called. Our modest (and perhaps not entirely serious) suggestion: BeeTee. As well as preserving the legacy of both brands, we feel this would be a fitting tribute to one of the UK’s leading actors, Maureen Lipman, who fronted BT’s most memorable advertising campaign nearly 30 years ago.
In the European context, this merger is in fact a return to the norm. Since BT sold Cellnet in 2002, the UK has been the only large European country in which the former state telco does not own a mobile operator. On the retail level, it has always been clear that there is little overlap between BT’s and EE’s business, apart from EE’s small home broadband & TV business.
BT has thus been able to make a strong argument that the impact of a merger on UK competition will be minimal, and the CMA has evidently accepted its case. BT/EE will be the market leader in both home broadband and mobile, but it will not be a dominant player in either market.
And when it comes to pay TV, BT is very much a challenger to the dominant player, Sky. The strength of its challenge is likely to be boosted by the acquisition of EE, enabling BT to offer advanced mobile TV features and attractive quad-play bundles that Sky will find difficult to match.
In the business market for mobile, Vodafone has been the UK market leader for several years. EE has made some headway in the business market, by promoting its 4G services and by building its Total Enterprise Mobility portfolio. So far, though, Vodafone’s predominance has not been threatened. The BT/EE deal is likely to change that, and perhaps quite quickly.
We believe that BT will leverage its brand strength and its existing customer base to mount an early and vigorous campaign on the UK business mobile market. This is low-hanging fruit for BT, since the only substantial investment that it will require is in marketing.
We are not very surprised that the CMA has decided against competitive remedies in the BT/EE retail business. We did, however, expect that there might have been some remedies in the “carrier’s carrier” part of BT’s operations, since it is a dominant player in some important carrier markets.
For home broadband, BT’s Openreach subsidiary supplies infrastructure and services for most of the UK’s ISPs. Moreover, a large amount of the backhaul from mobile network base stations is supplied by BT.
Evidently, the CMA was unconvinced by arguments that were made for applying remedies in this area, such as requiring the divestment of Openreach. However, it will be important for the UK regulators to keep a close watch on BT’s carrier’s-carrier operations post-merger, to continue ensuring fair play in this area.