Mixed reactions to BT/EE as Three/O2 faces a battle ahead

On the whole, reactions to the news that BT has been given the go ahead to buy UK mobile operator EE without any conditions were fairly muted, indicating that many had believed approval to be a "shoo-in". The deal had already received provisional approval from the UK's Competition and Markets Authority (CMA) last year.

Consumer lobbyists and rivals such as TalkTalk have grumbled about possible price rises and a lessening of competition in the ensuing months. The Internet Telephony Services Providers' Association (ITSPA) also raised concerns about the impact on the wholesale mobile access market, saying this market should be reviewed certainly before any agreement is reached on the market's other proposed merger: the plan by Three UK to buy and absorb O2 UK.

Consumer champion cable.co.uk added that the CMA approved the deal in the face of "a range of strong objections from around the UK telecoms industry," which fears that a combined BT-EE will wield too much power on the UK telecoms market and believes that the CMA has made its decision based on a flawed economic analysis.

Rupert Wood, a research director at Analysys Mason, also noted there is a danger that in some ways "the new organisation will be a little less innovative or disruptive than the separate parts."

However, Wood did note that the lack of naked broadband -- the provision of DSL without a phone line -- "is something of an anomaly in the UK, and I would have thought that now BT has a proper mobile arm, this will come sooner rather than later, and that genuinely is good for consumers."

Kester Mann from CCS Insight also highlights the difficulties that face BT in establishing itself in the consumer mobile market -- particularly if it does replace the EE brand, which Mann thinks is "inevitable".

"A challenge for BT's mobile ambitions in the consumer market is its legacy association with fixed-line services. This could be particularly relevant for the youth market, unaware of BT's previous mobile ventures," said Mann, who advised BT to take its time before making any major changes.

IDC, meanwhile, said it is not very surprised that the CMA decided against competitive remedies in the BT/EE retail business. "We did, however, expect that there might have been some remedies in the 'carrier's carrier' part of BT's operations, since it is a dominant player in some important carrier markets," the research company said, noting that a large amount of the backhaul from mobile network base stations is supplied by BT.

IDC said it will therefore be important for the UK regulators to keep a close watch on BT's carrier's carrier operations post-merger, to continue ensuring fair play in this area.

Overall, the BT-EE merger remains contentious despite approval at regulatory level. More potential controversy lies ahead as CK Hutchison pushes ahead with its plan to buy O2 UK and merge it with Three UK. One thing is for certain: that deal will be no shoo-in. Indeed, the European Commission is expected to impose concessions that could prove to be very difficult to swallow.--Anne

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