BT share price up as mobile network operators O2 and EE vie for £10bn deal

Oliver Smith
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British telecoms giant BT is set to play kingmaker. (Source: Getty)
British telecoms giant BT is set to play kingmaker as it prepares to buy either O2 or EE to jump-start its push into the consumer mobile market next year.

BT yesterday confirmed deal talks with “two UK mobile network operators, of which one is O2”, but cautioned that talks remained “at a highly preliminary stage”.

Despite this, BT’s shares jumped 3.7 per cent as analysts said synergies from a deal would be substantial and accelerate BT’s mobile strategy.

“This would allow BT to offer a quad-play bundle (TV, telephone, broadband and mobile) using their own network in a market rapidly moving to convergence, BT to generate operating expense savings from ownership of the mobile network... and BT’s Sports investments could be streamed across a larger subscriber base,” said Bank of America analyst David Wright.

Gavin Patterson, BT’s chief executive who led the group’s aggressive £2bn push into sports broadcasting with BT Sport, earlier this year promised to “shake up” the mobile market with a consumer offering by next April.

In preparation, BT has already secured a deal with EE to use its network to become a so-called mobile virtual network operator, but acquiring its own network would give BT a far more comprehensive offering.

“We continue to develop our own plans for providing enhanced mobile services to business and consumer customers, in line with our previous announcements,” said BT yesterday.

“We remain confident of delivering on these plans and have also been exploring ways of accelerating them, including assessing the merits of an acquisition of a mobile network operator in the UK.”

O2’s Spanish owner Telefonica yesterday confirmed talks with BT for a possible sale of its UK subsidiary. Orange and Deutsche Telekom, the joint owners of EE, thought to be the other network in talks with BT, declined to comment.

Executives from Telefonica, Orange and Deutsche Telekom, said last week that their strategies in Britain would depend in part on how aggressively BT went into mobile and whether consumers showed more interest in bundled deals.

Spanish website El Confidencial first reported that O2 could be sold in return for a 20 per cent stake in BT, valued at up to £10bn, as part of a “strategic alliance” to strengthen the two groups. Meanwhile Orange and Deutsche Telekom have been reportedly gearing up for a £10bn float of sale of EE in recent months.

The acquisition of EE or O2 would help BT, not only by bringing it a mobile customer base, but also establishing it with a high street retail presence which it currently lacks.

A deal would bring O2 back into the BT fold, having been spun off from the group in 2001 and then bought by Telefonica eight years ago in an £18bn deal that included operations in Ireland, Germany and the Netherlands.

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