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BT to acquire Mobile Operator EE for £12.5bn

| February 5, 2015

 

BT EE

 

BT has agreed definitive terms to acquire EE for £12.5bn. The combination of EE and BT will provide customers with innovative, seamless services that combine the power of fibre broadband with wi-fi and advanced mobile capabilities. Integrating the two companies will accelerate BT’s mobility strategy and increase BT’s capacity for future investment and product innovation as it continues to build world-class digital infrastructure in the UK.

M2M WORLD CONGRESS 2015

Transaction highlights

  • BT announces that it has agreed definitive terms to acquire EE for £12.5bn
  • EE is the leading mobile network operator in the UK with 31m customers of which 24.5m are direct mobile customers1 and 834,000 are fixed broadband customers. It has the largest 4G customer base of any operator in Europe
  • The consideration for EE will be payable as a combination of cash and new BT ordinary shares issued to both Deutsche Telekom and Orange
  • The cash consideration will be financed by a combination of new debt financing and approximately £1bn from the placing of new BT shares. The Equity Placing will be launched in due course
  • Following the Transaction and Equity Placing, Deutsche Telekom will hold a 12% stake in BT and will be entitled to appoint one non-executive member of the BT Board of Directors. Orange will hold a 4% stake in BT
  • By combining the UK’s most advanced 4G network and most extensive superfast broadband network, BT will have greater scope for future investment and product innovation
  • BT expects to achieve combined operating cost and capex synergies of around £360m p.a. in the fourth full year post Completion. This is equivalent to a net present value of around £3.5bn before integration costs or around £3.0bn after integration costs
  • BT expects to generate revenue synergies by providing a full range of communications services to the combined customer base. This includes BT selling its broadband, fixed telephony and pay-TV services to those EE customers who do not currently take a service from BT. BT also expects to accelerate the sale of converged fixed-mobile services to BT’s existing consumer and business customers and offer new services, using both companies’ product portfolios, skills and networks. BT expects to generate revenue synergies with a total net present value of approximately £1.6bn
  • The Transaction values EE at a multiple of 6.0x 2014 EBITDA and 9.6x 2014 OpFCF, adjusted for the net present value of the operating cost and capex  synergies2
  • The Transaction is expected to be accretive to FCF per share in the first full year post Completion3. As a result of EE’s high depreciation charge, reflecting historical network investment, the Transaction is expected to be accretive to Adjusted EPS one year later3
  • The cash return on investment of the Transaction is expected to comfortably exceed BT’s cost of capital in the third full year post Completion
  • The Transaction is subject to approval by the shareholders of BT and merger clearance, in particular from the UK Competition and Markets Authority. It is expected to complete before the end of BT’s 2015/16 financial year


BT Chief Executive Gavin Patterson said:

“This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UK’s leading 4G network will now dovetail with the UK’s biggest fibre network, helping to create the leading converged communications provider in the UK. Consumers and businesses will benefit from new products and services as well as from increased investment and innovation. The deal provides an attractive opportunity for BT to generate considerable value for shareholders, with significant operating and capital investment efficiencies supported by our tried and tested cost transformation activities. The enlarged BT will offer significant opportunities for employees as we lead the creation of a world-class digital infrastructure for Britain.”

EE Chief Executive Olaf Swantee said:

“Joining BT represents an exciting next stage for our company, customers, and people. In the last few years alone, we have built the UK’s biggest, fastest and best 4G network, significantly advancing the digital communications infrastructure for people and businesses across Britain. Today’s announcement will ensure the UK remains at the forefront of the mobile revolution, bringing even more innovation and investment in world leading connectivity for our customers.”

Deutsche Telekom Chief Executive Tim Höttges said:

“The transaction is much more than just the creation of the leading integrated fixed and mobile network operator in Europe’s second largest economy. We will be the largest individual shareholder in BT and are laying the foundations for our two companies to be able to work together in the future. This is another example of the consistent and successful execution of our portfolio optimisation strategy.”

Orange Chief Executive Stéphane Richard said:

“This is a landmark transaction for Orange and the next natural step in the evolution of BT and EE. We are confident the combined company will go on to provide new and exciting services to its customers as the demand for data and connected services continues to grow.”

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