EE’s mobile offering would complete the rebirth of BT’s consumer business

In its announcement BT made its ambitions for a fully-integrated customer offering clear. “The proposed acquisition would enable BT to accelerate its existing mobility strategy whereby customers will benefit from innovative, seamless services that combine the power of fibre broadband, wi-fi and 4G. BT would own the UK’s most advanced 4G network, giving it greater control in terms of future investment and product innovation,” it said in a statement.

The price on the table for EE is £12.5bn, which is noticeably more than the £9.6bn valuation BT was reportedly considering paying Telefonica for O2 just weeks ago. BT’s preference for the more expensive option, reflects the importance of a strong mobile infrastructure to its long-term plan to go from focusing solely on fixed lines and Wi-Fi to offering a complete package of services, covering broadband, TV, mobile, landline.

The telecoms firm is looking to press home its advantage in the consumer space over rivals such as Virgin Media and Vodafone, following the early success of its BT Sport offering since it launched last August. BT hailed the impact of its sports content for boosting the consumer business in its most recent quarter, with audience growth of around 45 per cent year-on-year on average.

Telecoms analysts observe that BT’s decision to pay a premium for EE is an admission on its part that it needs to do better than previous attempts to build a mobile offer. BT has been struggling to introduce a mobile product for several years, meanwhile EE has invested significant sums in becoming the nation’s number one network.

Dan Bieler, principal analyst for digital business and collaboration strategies at Forrester Research, said moving into the mobile market is a must for BT to defend its premium services which are increasingly threatened as other players enhance their triple and quad play offerings.

“BT’s proposed deal for EE is a consumer focus play rather than a business one. BT has been fairly successful at defending the retail space for a couple of years now, most recently through its sports offering. It’s actually one of the very few telecoms firms to have succeeded in offsetting the losses of its traditional telecoms business in the consumer space with a new TV offering,” he added.

“Should a deal be approved, then it would completely change BT’s colours. It would leave the business in a very different position in regards to Vodafone, O2 and Virgin Media as it would transform BT into an operator with a complete portfolio including the extremely important mobile part. This is where the action will be in the years ahead and BT at the moment is not a top mobile brand.”

Dominic Baliszewski, telecoms expert at broadbandchoices.co.uk, said BT would need to invest large sums into marketing any new services in order to shift perceptions in a market where customers largely view a mobile phone as a personal purchase rather than part of their household.

He added: “Should this deal go ahead, millions of people who are both EE mobile customers and BT broadband/TV customers already will effectively become triple or quad play BT customers without even blinking. If you find yourself in this situation, don’t feel rushed or pressured into signing up to a new contract. BT will likely offer some very attractive customer retention deals but it is always worth taking the time to compare and understand what you need versus what you want – especially in an increasingly complicated market.”

BT’s acquisition of EE would also reshape the commercial landscape, raising competition concerns. The telecoms firm provides services to the other operators and along with owning some 4G spectrum of its own, would be in a powerful position in the marketplace.

It is not yet known how the move would affect Weve, the mobile payments and loyalty joint venture between the UK's largest opeartors. A spokeswoman said: “We don’t comment on shareholder activity, Weve remains unchanged and it is very much business as usual at the company.”

Meanwhile Imran Choudhary, senior analyst at Kantar Worldpanel said: “Acquiring EE would give BT instant access to roughly one in three mobile customers in the UK who already use the EE network. BT already has an agreement with EE to use part of its network, so buying the whole network would provide a strong platform for BT to lead the telecommunications sector in the UK. Consumers should see some real benefits as others follow its lead with quad play offers.

BT's move for EE could spark a period of mergers and acquisitions, according to analysts, who predict a scramble from the sector's promiment players to expand the breadth of their services. Vodafone has reportedly held talks with Tesco’s on-demand service Blinkbox in recent weeks, while Three owner Hutchinson is said to have an interest in bidding for either O2 or EE.

Virgin Media said it was “business as usual” in the wake of the announcement, while Sky was unable to provide comment by the time this article was published.