BT raises £1B for EE takeover as rivals step up challenges

BT this week made further progress in its bid to buy mobile operator EE for £12.5 billion (€16.8 billion/$19 billion), raising £1 billion in a share placing on Thursday to help fund the deal.

The former UK incumbent said the £1 billion represents about 3 per cent of its outstanding share capital. It also noted that the placing was not conditional upon completion of the acquisition, and said if the acquisition does not complete it intends to use the proceeds for general corporate purposes.

BT agreed definitive terms to buy mobile operator EE from existing owners Orange and Deutsche Telekom on Feb. 5, bringing to an end the first phase of a process that is set to turn the company into the market's biggest converged provider of fixed and mobile telecoms services.

At the same time, a number of announcements this week indicate that the company's competitors are not resting on their laurels.

As rivals TalkTalk and BSkyB plot their mobile strategies with mobile virtual network operator (MVNO) agreements and Vodafone plans to enter the consumer broadband market, existing quad-play provider Virgin Media on Friday unveiled a five-year plan called "Project Lightning" that will see the cable operator invest £3 billion over five years in connecting an additional four million homes and businesses.

Liberty Global-owned Virgin Media, which sells mobile services under the Virgin Mobile MVNO, clearly threw the gauntlet down to BT, saying that households connecting to its network for the first time will benefit from broadband speeds of 152 Mbps. The cable company claimed that this is "at least twice as fast as the fastest speeds available from BT, TalkTalk and Sky."

Tom Mockridge, Virgin Media CEO, said: "In virtually all of the areas we have identified for expansion, BT is the only option available right now. It's ageing copper telephony wires are not capable of the ultrafast connectivity that Virgin Media delivers. Soon we will offer unbeatable services to even more homes and businesses across the country."

Also on Friday, rural broadband specialist Gigaclear said it has raised £6.5 million to help drive the deployment of broadband networks with speeds of up to 1 Gbps.

What's more, rivals continue to challenge BT in the highly competitive pay-TV market, with BSkyB this week agreeing to pay £4.2 billion to show 126 live English Premier League matches a season from 2016 to 2019.

With BT also spending £960 million to show 42 games a season, the companies will spend a combined £5.14 billion over three years.

To be sure, as BT goes through the merger process to buy EE, it will continue to face challenges on every front--in mobile, superfast broadband and TV services.

As things stand, despite massive planned investments such as the £12.5 billion to buy EE, BT's strategy seems to have largely met with approval from ratings agencies and investors: Bloomberg noted that Moody's Investors Service, Standard & Poor's and Fitch Ratings all affirmed their ratings on the company, while RBC Capital Markets analyst Roger Appleyard said BT may even be headed for an upgrade.

For more:
- see this Bloomberg article
- see this Virgin Media release
- see this Gigaclear release

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