BT/EE Takeover Clears First Government Hurdle

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£12.5bn deal gets phase 1 competition approval, bringing takeover one step closer

BT’s multi-billion pound takeover of mobile network EE has completed its first challenge with the granting of the first phase of approvals for the deal.

The deal, rumoured to be valued at around £12.5bn, has received phase 1 competition approval from the UK’s Competition and Markets Authority (CMA), following an initial submission last month.

The approval was fast-tracked through the CMA’s processes, a sign that the body believes the deal meets initial criteria sufficiently.

Passed

acquisition handshake ©Drazen shutterstockPassing phase 1 approval means that the CMA believes the transaction meets several key initial criteria.

This includes raising the potential for “a realistic prospect of a substantial lessening of competition in relation to the supply of wholesale access and call origination services to MVNOs and fibre mobile backhaul services to mobile network operators in the UK,” the CMA said in a statement.

The CMA has now referred the deal for an in-depth phase 2 investigation, overseen by a group of independent panel members, where formal opposition against the takeover from third parties, including some of BT and EE’s rivals, will be considered.

However so far there has only been one official complaint, from CityFibre, which claimed that the deal could have a damaging effect on consumers and the British telecoms industry as a whole.

“BT and EE are leading suppliers of UK telecommunications services and together they will have a strong presence in many telecommunications markets. They also supply important inputs at the wholesale level, which enable other communications providers to compete at the retail level in the provision of mobile services.

“We have found that there is a real risk that the merger could reduce their incentives to supply these inputs and that this could have a detrimental impact on the retail mobile market,” said Andrea Coscelli, CMA executive director of markets and mergers and decision-maker in this case.

“BT and EE have recognised that the issues in this case are complex and that the test for reference at phase 1 would be met. They therefore requested use of the fast track procedure and, after due consideration, we believe this to be appropriate.”

BT has claimed that the deal will boost competition in the UK communications market, benefiting both consumers and businesses.

It says that its market share in both the broadband and mobile markets would not exceed the thresholds that regulators normally look for in approving such deals, nor would it impact competitors’ ability to access the Openreach copper and fibre infrastructure.

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