The UK Competition and Markets Authority has officially approved the acquisition of the UK’s largest mobile operator by its dominant fixed-line player to create a clear multiplay market leader.
This decision had been expected since the CMA went to the trouble of giving the move a provisional green light last October, pausing only to field a last round of objections from the usual interested parties, which it has clearly rejected.
“After considering in detail responses to the provisional findings, as well as the extensive evidence gathered during the inquiry, the CMA inquiry group has decided that the merger is not expected to result in a substantial lessening of competition (SLC) in any market or markets in the UK, including in relation to the supply of retail mobile, wholesale mobile, mobile backhaul, wholesale broadband and retail broadband services,” said the announcement.
The underlying rationale remains the fact that neither BT nor EE has much of a presence in each other’s markets, to there is no additional threat to competition. What seems to have been discounted is the potential excessive influence over consumer choice having the leading mobile and fixed-line offerings owned by one company might have. On top of that BT is the wholesale network provider to most of its broadband competitors and has been aggressive in the content space, even out-bidding Sky at times, while EE is an MVNO supplier to multiplay competitors including Virgin Media.
“The retail mobile services market in the UK is competitive, with four main mobile providers and a substantial number of smaller operators,” said John Wotton, Inquiry Chair. “As BT is a smaller operator in mobile, it is unlikely that the merger will have a significant effect. Similarly, EE is only a minor player in retail broadband, so again it is unlikely that the merger will have a significant effect in this market.
“We have also found that in supplying services such as backhaul, wholesale mobile or wholesale broadband services a combined BT/EEwould not have both the ability and the incentive to disadvantage competitors such that there would be significant harm to competition.” He also noted that the Openreach issue is Ofcom’s problem, not his.
BT is pleased. “It is great news that the CMA has approved our acquisition of EE,” said BT CEO Gavin Patterson. “We are pleased they have found there to be no significant lessening of competition following an in-depth investigation lasting more than ten months.
“The combined BT and EE will be a digital champion for the UK, providing high levels of investment and driving innovation in a highly competitive market. I have no doubt that consumers, businesses and communities will benefit as we combine the power of fibre broadband with the convenience of leading edge mobile services. I look forward to welcoming EE into the BT family.”
As you would expect BT isn’t going to waste any time closing the deal, anticipating completion by 29 January. Current EE CEO Olaf Swantee will not be embraced to the BT bosom and will leave shortly after completion. His place will be taken by current EE CCO Marc Allera.
“To leave EE is probably the hardest decision of my career, but I feel the time is right for me to handover for the next exciting chapter of EE’s incredible journey. I wish Marc all the success for the future,” said Swantee earlier this year.
The rest of the UK’s CSPs seem to be resisting the temptation to moan about the approval of this deal, at least publicly. But Jo Causon, CEO of the Institute of Customer Service said “News of the impending purchase of EE by BT Group raises questions about the level of customer service UK consumers may get.”
The creation of BTEE poses a serious competitive threat not just to mobile operators but fixed line companies such as Virgin Media and digital content players like Sky. BT is betting that having the strongest multiplay competition will enable it to take customers from its competitors and if that proves to be the case over the course of this year we’re likely to see further major M&A activity in the UK telecoms market.