Private equity firms KKR and Apax are reportedly negotiating with Everything Everywhere's (EE) parent companies France Telecom and Deutsche Telekom over a possible £8 billion bid to acquire the UK's largest mobile operator.
Former Vodafone CEO Arun Sarin is said to be leading the bid team with the support of Tom Alexander, the former head of EE and founder of Virgin Mobile. The discussions are believed to have been underway since February, according to European private equity specialists Unquote.
While the suggested price for EE ranges from £6.5 billion to over £12 billion, the ongoing talks may not lead to a bid, according to unnamed sources cited by Bloomberg.
Alternatively, a bid could focus on buying the EE stake held by Deutsche Telekom, which is looking to raise cash and is said to be keen to exit the UK market, according to the Guardian. Sources told the newspaper that France Telecom and Deutsche Telekom have often disagreed over EE's branding and future direction, and retaining the status quo was not an option.
A former EE exec, who requested anonymity, told the Guardian that the merger of Orange and T-Mobile UK was a forced marriage. "It was like two ships colliding," the source said. "There was this enormous noise about this colossus shaking up the marketplace and two and a half years down the line nothing has largely changed."
However, a deal is only likely if the private equity-backed bid team can come up with a substantial offer.
"Considering that T-Mobile UK was struggling prior to entering into this [JV] deal with Orange, it is imaginable that it could decide to cut its losses and bail out of the UK. It is imaginable but it doesn't mean that it has to happen," Emeka Obiodu, a senior analyst at Ovum, told Computerworld UK. "By entering into the EE infrastructure, it brought on France Telecom to carry its UK operations. I am in no doubt that Deutsche Telekom could continue to sustain its involvement in EE for the foreseeable future."
Analysts at Espirito Santo bank are also doubtful over the bid being successful, according to the Guardian. "The figurehead for the deal, Tom Alexander, is an odd choice given that he was allegedly seen to have failed once in his management role at EE," analysts with the bank wrote in a note to investors which put a £10.6 billion valuation on the company. "Certainly, the performance of EE under Olaf Swantee has been markedly better."
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