Deutsche Telekom to sell its UK arm to BT

EE logo

A report on BBC News yesterday claims that Deutsche Telekom is about to sell its UK arm to BT, the nation’s largest fixed line telecoms operator. In a deal supposedly worth £12.5 billion, BT plans to buy mobile operator, EE. This news comes shortly after the announcement that the T-Mobile brand name in Britain is dead, along with its partner network operator, Orange.

If the deal goes through, it would create a massive communications company covering fixed line phones, broadband, television and mobile. What’s more, it see’s the largest fixed-line company buying out the largest mobile company, creating a mammoth telecoms company with the largest 4G LTE coverage in the country.

For some context, and a short history lesson, EE was once made of two separate companies: Orange and T-Mobile, and named Everything Everywhere. This was before the UK’s LTE auctions when the joint venture was able to get a head start on its rivals and build up a 4G LTE network before the others could.

Orange and T-Mobile, before joining, were the nation’s 3rd and 4th largest carriers. It’s a similar position to Sprint and T-Mobile, except Britain had a fifth major player: Three UK.

T-Mobile – of course – was owned by Deutsche Telekom, and Orange was owned by a French telecoms company of the same name. The deal to merge was a simple one. Both DT and Orange, France would own 50% of the merged company. Once the joint company became the main brand, with EE, it became the largest carrier in the country and meant there was now only 4 carriers. Not 5.

BT – the fixed-lined company looking to buy EE for £12.5 billion – was once the sole provider of fixed-line telephony in Britain. It was only relatively recently that other companies were able to get in on the action and start selling landline telephone packages.

In short: A company which used to have the monopoly on fixed line, is now buying the largest mobile carrier, one which is really the only one close to having decent LTE coverage in most of the UK’s cities and towns. It’s not exactly a pro-competition move, but you can read a lot more in to the details of the merger on the BBC’s tech site.

Now the reason I’m writing about this on TmoNews: This could lead to a relief of pressure on Deutsche Telekom to sell T-Mobile US. At least in the short term. It’s no secret that DT, T-Mobile’s biggest shareholder has attempted to sell its controlling stake. Twice.

But, BT has spent £12.5 billion to buy all of the shares currently owned by DT and Orange.

If the proposed UK deal goes through, DT gets a 12% stake in the combined BT+EE company. It gets a seat on the board too, but there will be virtually no need for the German parent company to continue investing its cash in improving and expanding the network or maintaining the infrastructure. It’s one less thing to worry about for the telecoms giant.

Now, I’m not living in dreamworld here. T-Mobile US still needs to make its Uncarrier moves stick. It has to start making a profit in a way which means DT doesn’t have to be as financially involved. And if the momentum built up last year is anything to go by, it’s not impossible for that to happen. A number of recent moves like Score! and the new $15 Sim Starter Kit price could help incrementally increase the amount of revenue the company makes from each customer. That’s not to mention the amount the company is currently spending on acquiring spectrum. It spent billions last year buying 700MHz and 1900MHz frequencies nationwide. Money which it won’t need to spend once the networks are rolled out across the entire U.S.

Regardless, I think this BT+EE deal is potentially a good deal for T-Mobile US. Even if it’s not a great deal for us Britons. Let us know your thoughts in the comments, as always.

Source: BBC News

 

 

Tags: , , , , , , ,

  • ChristianMcC

    Sadness! Who do you use for your provider, Cam?

    • Cam Bunton

      Ironically, I just left EE for BT as my broadband provider. I’m with EE for mobile, because I still have discount from when I worked for T-Mobile UK.

  • Hey @phonedog_cam , is BT strong enough to make its way to the US market?

    • Rob H.

      I can see VZW and AT&T freaking out if BT entered the US market.

      • eAbyss

        They’re freaking out now with T-Mobile in the market…

    • wicketr

      They would have to buy their way in by buying out an existing company because there’s simply not any spectrum left to start their own company with what’s already out there.

  • bob90210

    Cam, you have the wrong headline. The correct headline is “DT to sell its UK arm, EE, to BT.”

    • Cam Bunton

      Does Deutsche Telekom have any other UK arms?

      • bob90210

        Just trying to add more acronyms since the headline did not have enough.

  • Kogashuko

    Tmobile still needs some much needed 700 spectrum and additional work if they want to catch up in the states. The Sprint merger would have been the smartest thing they could have done and still might be.

    • eAbyss

      T-Mobile is buying up all the block 12 spectrum it can and will have it rolled out by the end of the year.
      LTE should be deployed on the entire network by mid year.
      They will be only a year behind Verizon and AT&T in terms of coverage by the end of the year.

      What more do they need to do?

      A merger between the top four carriers would never be allowed and for good reason.

  • k

    As I read other articles, it looked to me like a stock swap and “potential” for cash to DT if the valuations work out. I see the logic that DT would spend less in capital expenditures, however, their current issue is they need capital to upgrade their fixed equipment on the continent. Would less spending in the UK be enough to counter their desire to raise more money for funding capex in Germany? I would think they would’ve like cash from this deal as well, at least for the near term.

  • Jay J. Blanco

    Hope some of that doe will benefit t-mobile even if it’s just 500Mil

    • Kidney_Thief

      I doubt T-Mobile USA sees a penny from this.

      • bob90210

        Of course not. They use pounds and shillings.

  • Maverick_F14

    Imagine BT going into the mobile wireless US market by buying Sprint from Softbank and expanding it’s coverage that will increase base users in return making it the 1st major wireless carrier then eventually swallowing up tmobileus and Google becoming the 4th largest mobile wireless network in the US.

    It could happen. :-D

    • SaggyBalls

      Punctuation, motherfucker, do you use them?

      • Tommydallas

        ^^^ really?!?! You have to use foul language? Cam please delete the above comment. So rude. Who cares about punctuation? It’s a blog not some term paper

        • thepanttherlady

          I care about punctuation but agree that there was no reason for such a rude response.

          Comment deleted.

    • Kidney_Thief

      A couple things.
      1) BT doesn’t have anywhere near enough cash to buy T-Mobile, much less Sprint as well. Spending as much as they are for EE is a pretty big splash for them, akin to when Google bought Motorola.
      2) Why would BT want to enter the US market anyway?
      3) Where do you reckon Google is going to get their spectrum from? Move data across fiber? No problem. Moving it through the air? They don’t really have provisions for that. If there’s going to be a fourth player, it’s not going to Google.

      • Maverick_F14

        lol, It was simply an idea from left field.

        A guy can dream can’t he! :-)

    • eAbyss

      1) BT doesn’t have enough money to buy Sprint.
      2) There’s no reason for BT to enter the US market.
      3) Regulators would never allow Sprint and T-Mobile to merge and for good reason.
      4) Google, if the rumors are true, would lease capacity from Sprint and T-Mobile in order to get them into the wireless business. This does not make them a carrier. Billions would have to be invested to purchase carriers and spectrum and to lease and build towers. This is something Goggle would not be interested in doing.

  • consolidation sounds good if prices are to remain competitive but do England have rules on monopolies like the US have or are they in favor of the merger?

    As someone who frequents England every year, i would like to see better plans, a big familiar name, and less and less deadspots

    • josephsinger

      T-Mobile (which was formerly one2one before it became T-Mobile) was never as strong as T-Mobile. Like in the US only two operators had 900 Mhz licenses. One of them was BT which became O2 and the other was Vodafone. All others were relegated to DCS 1800 and like PCS it suffered from poor in building penetration compared to the 900 Mhz licensees. A big familiar name means pretty much nothing. Even in countries where your carrier exists it’s not uncommon for it to make little or no difference other than possibly being a preferred roaming partner. What counts is how many towers an operator has and what frequency it uses to deliver service (900 Mhz vs 1800 Mhz.)

      • eAbyss

        “T-Mobile… was never as strong as T-Mobile.”

        Huh?!

        • josephsinger

          I should have typed as strong as BT who has/had the 900 license.

  • Aurizen

    I’m confused… how can this benefit T-Mobile USA?

    • eAbyss

      It doesn’t really apart from DT having more cash on hand.

  • josephsinger

    Interesting that BT did the same thing that US telecom USWest did as well. USWest sold their cellular/850 network to AirTouch which became Verizon. Later USWest (which became Qwest) and built a CDMA PCS network. Qwest eventually sold their PCS network to Sprint being the only RBOC to have no mobile network when it was bought by CenturyLink.

  • eAbyss

    DT is going to sell EE to BT…