BT in driver’s seat as Deutsche Telekom, Orange, Telefonica to exit

UK telecom market will see fresh round of consolidation soon if BT Group’s preliminary talks to buy EE from Deutsche Telekom and Orange or O2 from Telefonica materialize.

A takeover of either O2 from Telefonica or EE from Orange and Deutsche Telekom will enable BT to become a communications giant covering fixed-line phones, broadband, mobile and TV.

This will be a re-entry of BT into the mobile service provider market in the U.K. The strategy of BT is to sell both broadband and mobile services and reduce revenue pressure. Earlier, British Telecom had exited from mobile markets including India. In 2002, BT spun off O2, then called BT Cellnet. In 2005 it was acquired by Spain’s Telefonica for £17.7 billion.

Last year, Telefonica sold a number of assets in order to reduce debt and improve its credit ratings.

This year, Deutsche Telekom indicated its willingness to exit from the U.S. telecom market by selling T-Mobile US to SoftBank, the majority owner of Sprint.

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BT in UK

Both discussions are in preliminary stages. But BT Group wants to enter mobile services business because customers are increasingly looking to buy their fixed-line and mobile services from one telecom service provider.

According to Citigroup, EE holds 33.8 percent of the UK mobile market by revenue, and O2 some 26.2 percent, said a BBC report.

BT Group, which was keen to start 4G services in the U.K., has about a third of the home broadband market, the largest in the country.

EE’s owners – France’s Orange and Germany’s Deutsche Telekom are having preliminary exploratory discussions with BT Group. It is too early to state whether any transaction may occur.

Earlier this week, BT said it is in talks to buy Telefonica’s O2 unit or another mobile-phone company to expand its wireless offering in the U.K. and complement its broadband network.

EE, which has the largest wireless network in the country, was valued at about $19 billion by its co-owners in October, said a Bloomberg report.

Deutsche Telekom said it and Orange regularly analyze the development of the market in which EE operates, evaluating strategic options which have the potential to create value for EE’s shareholders and strengthen its market position.

Deutsche Bank values O2 UK at £9 billion, while UBS values it at £9.6 billion.

Baburajan K
[email protected]