BT confirms details of £12.5 billion EE buy

BT has officially confirmed details of its deal to buy EE for £12.5 billion. EE's current owners will take a slice of BT as part of the deal, which will be done and dusted by March next year.

Having previously announced the deal was on its way, BT has now officially confirmed the due diligence is done and financing is in place. BT will stump up part of the payment in cash, raised by a combination of new debt financing and the placing of new BT shares. This will happen in due course, raising roughly £1 billion.

The deal will see EE's current European owners take a stake in BT: French company Orange will hold 4 percent, while Germany's Deutsche Telekom will hold a 12 percent stake and the right to appoint one non-executive member of the BT board of directors.

In response to the deal, BT shares rose more than 2.5 percent on London's FTSE 100 stock exchange.

What does this mean for BT and EE customers?

Primarily, BT will offer its broadband, landline and pay-TV services to those EE customers who aren't currently signed up with BT. And if you're a BT customer, whether at home or as part of your business, you'll be offered new mobile services.

One change we will see soon is that BT intends to start offering mobile services through EE before the takeover deal is done, through the existing MVNO agreement between the companies. Exactly what form these service will take and how much they will cost remains to be seen. In the long-term, the EE brand might even disappear, just like Orange and T-Mobile have been phased out since they merged to form EE.

Will the deal be approved by regulators?

The merger is due to be finalised by the end of BT's 2015/16 financial year, which falls on 31 March 2016. Like all deals of this type, however, it does need to be given the thumbs-up by shareholders and the green light from the UK Competition and Markets Authority.

"Things generally look promising and the green light is likely to be given, albeit with concessions needed," says Matthew Howett, practice leader of regulation at industry observer Ovum. "One of those is likely to address the combined entity's spectrum holding. BT was particularly successful in the 2013 4G spectrum auction, acquiring spectrum at 2.6GHz. [T]he inquiry is likely to assess what adding this to EE's already sizeable lot will mean.

"What potentially complicates things is the planned acquisition of O2 by Three -- it is not yet clear whether issues arising from that will be considered by the CMA separately or as part of this review. Combined, Three and O2 would have a concentration of the lower-frequency spectrum (ideal for providing coverage), but would have no higher-frequency spectrum at 2.6GHz, which is needed to accommodate consumers' insatiable appetite for data. If both transactions are to conclude, there could be a reorganisation of spectrum holdings between the two enlarged operators."

Will there be job losses?

BT estimates it will cost around £600 million to integrate the two companies, but even factoring that in the merger will save them both £3 billion. Again, it's not yet clear what that means for current employees of either firm, but it seems likely in situations like this that there will be job losses.

With 31 million customers, EE is the biggest mobile network operator in the UK. 24.5 million of those are mobile customers, and another 834,000 are fixed broadband customers. The first network to launch a 4G service in the UK, EE now has the largest 4G customer base of any operator in Europe with 7.7 million customers enjoying superfast speeds on their phones, tablets and dongles.

With its broadband, TV and landline business, BT has three of the four pillars of today's telecoms market. Buying EE would add the fourth -- mobile services. Those four pillars make up a so-called "quad-play" company.

Industry observer Paolo Pescatore of CCS Insight calls the deal "a major statement of intent regarding its multi-play aspirations [and] serves as a clear warning to UK rivals, notably Vodafone, Sky and Virgin Media." Virgin is a quad-play provider already, while Sky recently announced plans to round out its quad-play offering with a new mobile network.

Looking ahead, BT has plans to plough money into a number of main areas, including fibre broadband, TV services and content and UK business markets. BT also plans to do away with any distinction between fixed and mobile networks.