16.12.2014 03:04:37

BT Group In Exclusive Talks To Buy EE For 12.5 Bln Pounds

(RTTNews) - UK-based fixed-line operator BT Group plc (BT_A.L, BT) said Monday that it has entered into exclusive talks to acquire the UK's largest mobile operator EE Ltd. for 12.5 billion pounds, or $19.6 billion, in cash and stock.

BT Group is in talks with EE's joint shareholders Germany's Deutsche Telekom AG (DTEGY.PK) and French telecom giant Orange SA (ORAN). The company noted that the period of exclusivity will last "several weeks", allowing it to complete due diligence and for negotiations on a definitive agreement to be concluded.

BT Group expects the proposed acquisition of EE will enable it to accelerate its existing mobility strategy, whereby customers will benefit from services that combine fibre broadband, wi-fi and 4G.

The company said that while continuing the exclusive talks, it will continue with its own plans for providing enhanced fixed-mobile converged services for businesses and consumers.

BT Group will pay for the acquisition through a combination of cash and new BT ordinary shares that will be issued to both Deutsche Telekom and Orange.

Following the transaction, Deutsche Telekom would hold a 12 percent stake in BT Group and would be entitled to appoint one member to BT Group's board of directors. Orange will acquire a 4 percent stake in BT Group.

BT Group expects significant synergies from the acquisition of EE, mainly through network and IT rationalization, back-office consolidation and savings on procurement, marketing and sales costs.

In addition, the company expects to generate revenue synergies through the sale of fixed-line services to those EE customers who do not currently take a service from BT. The company also plans to accelerate the sale of converged fixed-mobile services to its own existing consumer and business customers.

BT Group noted that the exclusivity agreement does not require the parties to enter into a transaction and there can be no assurances that one will occur. However, if a deal is agreed, approval by BT Group's shareholders will be required as a condition of the purchase.

EE has 24.5 million direct mobile customers and reported adjusted EBITDA of 1.60 million pounds for the twelve months to June 30, 2014.

According to EE, its 4G coverage today reaches 75 percent of the UK population, while its 2G coverage reaches 99 percent of the population and 3G reaches 98 percent of the population.

In late November, EE confirmed that its joint shareholders, Deutsche Telekom and Orange are in exploratory talks about a sale of the company to BT Group. EE, which has about 15,000 employees and 580 retail stores, serves more than 30 million customers across its mobile, fixed and wholesale businesses.

BT Group had said earlier that it has received expressions of interest from shareholders in two UK mobile network operators about a possible transaction in which the company would acquire their UK mobile business.

BT Group noted at that time that one mobile network operator was Spanish telecom operator Telefonica S.A.'s (TDE.L, TEF) UK mobile business, Telefonica UK or O2. Media reports had indicated that the other mobile network operator was EE.

BT closed Monday's trading at $62.82, up $0.90 or 1.45 percent on a volume of 271,738 shares. In after-hours, the stock further gained $0.05 or 0.08 percent to $62.87.

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