On February 5, 2015, BT announced that it has agreed definitive terms to acquire EE for £12.5bn. With the due diligence now complete and financing in place, attention now turns to getting the necessary regulatory clearance from UK competition authorities.
The competition investigation is likely to focus on spectrum holdings and wholesale access for other mobile operators
BT anticipates that the transaction will need to be cleared by the Competition and Markets Authority (CMA). Depending on whether or not remedies are required, that process could last between eight and 32 weeks. The operator does not expect clearance from the EC to be required. At this point in time, things generally look promising and the green light is likely to be given, albeit with concessions needed. 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, and the inquiry is likely to assess what adding this to EE’s already sizable 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. A 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 for capacity given consumers’ insatiable appetite for data. If both transactions are to conclude, there could be a reorganization of spectrum holdings between the two enlarged operators.
The other concession likely to be needed concerns mobile backhaul. Other UK mobile operators are already calling for guarantees that the wholesale products BT currently provides for backhauling traffic will be offered on a nondiscriminatory basis. This issue could be resolved if all of the relevant products currently provided by BT Wholesale move into the BT Openreach division, which is already obligated to provide access on a nondiscriminatory basis. This solution is on the radar, and Ovum understands that Ofcom has been considering it since November of last year. Given the importance of these inputs to other mobile operators, a firm guarantee will be needed.
Matthew Howett, Practice Leader, Regulation