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Mobile services

BT & EE Spur UK Sector Shake-Up

With a former state-owned monopoly that doesn't "do" mobile, the UK telecoms market has long seemed a bit of a European oddity. All that should change, of course, now that BT has agreed to pay the princely sum of £12.5 billion ($19.1 billion) for EE, the country's biggest mobile operator, bringing its telecoms sector into line with the European norm. (See BT Locks Down £12.5B EE Takeover Deal.)

But the transition will be far from straightforward. BT Group plc (NYSE: BT; London: BTA)'s mobile maneuvering has sparked a frenzy of countermoves by the UK's other communications players. When the dust finally settles, we could be left with fewer mobile network operators, an incumbent that once again bestrides the fixed and mobile sectors and a whole bunch of quad-play wannabes and worriers.

Things haven't been this exciting since the heady days of the 3G auction. But it's all getting a bit confusing, and so Light Reading has prepared this nifty two-part guide to the main players and their priorities. In this first installment, we look at the mobile network operators -- plus BT.

BT
Still the dominant fixed-line player, BT obviously feels it has missed out on mobile since it spun off the old BT Cellnet business -- now O2, and owned by Spain's Telefónica SA (NYSE: TEF) -- back in 2001. In 2013, it picked up some 2.6GHz spectrum during the 4G auction, and it spent the tail end of last year talking up a forthcoming launch of mobile services.

Table 1: BT at a Glance

FY 2013/14 YoY change
Revenues £18.3B -0.3%
EBITDA £6.1B -0.4%
Net profit £2.0B 3.6%
Capital expenditure £2.3B -3.8%
Net debt £7.0B -9.9%
Customers 9.9M -2.9%
−Broadband (retail) 7.3M 9.0%
−Fiber (retail) 2.1M 40.0%
Source: BT

But few were prepared for its audacious £12.5 billion ($19.1 billion) bid for EE , the UK's biggest mobile operator, in December. Sealed earlier today, that deal will create a market leader in both the fixed and wireless sectors, giving BT a springboard from which to launch new broadband, TV and mobile services and rousing other players to respond.

O2 was also rumored to have been in the M&A frame but BT obviously preferred the ample look of EE's network and spectrum assets. Its main worry may be that competition watchdogs force EE to give some of these up -- regulators have done that elsewhere, after all -- but it sounds confident about getting the deal past authorities. As BT CEO Gavin Patterson pointedly pointed out in a recent earnings call, a takeover wouldn't reduce the number of mobile networks in the market, and that can't be said for certain other mergers that are afoot. (See BT Offers $19.5B to Buy EE, Why BT + EE Makes More Sense and BT Puts G.fast at Heart of Ultra-Fast Broadband Plans.)

Next page: EE and 3

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iainmorris 2/6/2015 | 3:47:41 AM
Network sharing Consolidation also raises questions about the future of the network-sharing deals that have taken shape in the UK market. EE, for instance, shares network infrastructure with 3 and that relationship will look untenable if Hutchison Whampoa buys O2. 
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