U.K. Watchdog Provisionally Clears BT's Buy of EE -- Update

By Simon Zekaria and Rory Gallivan

LONDON--The U.K.'s antitrust watchdog has provisionally cleared BT Group PLC's (BT.A.LN) proposed multibillion-dollar acquisition of mobile operator EE without demanding any concessions, providing a fillip for the British telecom group's efforts to bolster its position in its home market.

The Competition and Markets Authority, which fast-tracked the deal for further in-depth investigation, said on Wednesday that the merger is "not expected to result in a substantial lessening of competition in any market in the U.K."

Last February, BT agreed to acquire EE from its owners Deutsche Telekom AG (DTE.XE) of Germany and France's Orange SA (ORA.FR) for GBP12.5 billion ($19.1 billion).

The deal marries the U.K.'s largest fixed-line telecom operator and the country's biggest mobile operator. The combination would allow BT to bundle fixed-line, mobile, broadband and television services.

European telecoms operators have been looking to push though deals that join up telecom and media services, seen as boosting subscriber revenue and increasing customer loyalty. The takeover gives BT more than 30 million EE customers, of which 24.5 million are direct mobile customers and 834,000 are broadband customers, as well as 580 retail stores and about 15,000 new employees.

John Wotton, who chaired the inquiry, highlighted that the two companies largely compete in separate areas.

"We provisionally think that the retail mobile market in the U.K., with four main mobile providers and a substantial number of smaller operators, is competitive, Mr. Wotton said. BT is a relatively minor player in the U.K. mobile sector, EE has little share of the broadband market, while the combined company wouldn't have an unfair advantage in wholesale markets, he said.

The CMA will publish its final report in January next year.

"The combined BT and EE will be good for the U.K., providing investment and ensuring consumers and businesses can benefit from further innovation in a highly competitive market, BT Chief Executive Gavin Patterson said in a statement.

"The announcement that no remedies will be applied represents a particular victory for [BT]," said CSS Insight analyst Kester Mann. Rivals such as Sky PLC (SKY.LN), Vodafone Group PLC (VOD.LN) and TalkTalk Telecom Group TALK.LN) have repeatedly expressed concern over the dominant position of a combined BT/EE, Mr. Mann said.

"We are concerned by the CMA's provisional clearance of the proposed merger between BT and EE," said a spokesman for TalkTalk.

Ofcom, the U.K.'s communications regulator, is independently reviewing the role of Openreach--BT's infrastructure division--as part of its digital communications review. BT's rivals have called for Openreach to be separated off on competition grounds though BT says the group's structure is vital for investing in the network.

At 1142 GMT, BT shares rose 3.1% to 466 pence, valuing the company at 37.8 billion pounds ($57.8 billion).

-Write to Simon Zekaria at [e-mail]. Rory Gallivan at [e-mail];

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October 28, 2015 08:40 ET (12:40 GMT)

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