BT IS expected today to reveal the outcome of takeover talks with O2 and EE, as it looks to buy one of the mobile groups for around £10bn.
A deal, which would be funded by a mixture of BT stock and cash, is part of the firm’s strategy to move into so-called quad play by adding mobile to its existing offering of broadband, TV and fixed line telephone services.
BT has been in talks with O2’s Spanish owner Telefonica and EE’s owners, Orange and Deutsche Telekom, for nearly a month about a deal to buy one of the mobile operators. Both are thought to have told BT they are willing to accept shares as part of a deal to reduce the cash bill. EE is likely to cost between £10bn and £11bn, while O2 is valued at between £9bn and £9.5bn.
On Thursday the chief executive of Telefonica, Cesar Alierta, reportedly arrived in London to hammer out details of a deal with BT.
BT is unlikely to fund the cash portion of any deal entirely through debt, which has fallen steadily to around £7bn, down from £30bn in 2001. “A fully debt-financed deal…would probably push its leverage outside the range of the Baa2 rating category,” said Moody’s vice president Ivan Palacios. “It would also reduce the company’s flexibility to bid in the upcoming Premier League rights auction and to face potential higher cash contributions to the pension plan as a result of the ongoing triennial actuarial pension review.” Instead BT is likely to use a mixture of debt and a rights issue to fund the cash portion of any deal.
Meanwhile, the Premier League also announced on Friday that it had kicked off the bidding process for live domestic TV rights for the three seasons from August 2016.