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LONDON, June 17 (Reuters) - A combination of BT andEE would provide a major boost to the British digital economy,the telecom giants said on Wednesday, in the opening gambit ofwhat is likely to be a highly contested regulatory battle.
The 169-year-old BT agreed to buy EE for 12.5 billion pounds ($19.6 billion) earlier this year tobring the country's biggest fixed-line and mobile operatorsunder one roof.
BT Chief Executive Gavin Patterson said the deal wouldcreate a national champion with the scale and expertise to meetBritain's future communications needs.
Rivals would benefit rather than be harmed by its size andreach, he said, adding that hundreds of companies used itsnetworks on equal terms, and they would continue to do so.
"We are happy for them to stand on our shoulders," he said.
But rival firms such as Vodafone and TalkTalk have raised the alarm, saying BT, which providesnetwork infrastructure to competitors through its Openreach arm,could abuse its dominant position and harm competition.
Broadband provider TalkTalk said the deal needed to beclosely scrutinised.
"Quite simply, consolidation leads to reduced competitionand a reduced incentive to innovate and, crucially, higherprices - as demonstrated just last month by mobile price risesin Ireland," a TalkTalk spokeswoman said.
Competing operators want regulators to force BT to spin offOpenreach, and to see other concessions in areas like spectrum.
In response, BT and EE set out their stall on Wednesday,appealing to the regulator and political leaders to see thepotential from the deal and noting that it would take theircombined clout and ambition to meet ever-growing demand for dataand services.
"A world-leading, combined fixed and mobile, digitalinfrastructure will sit at the heart of a successful UKeconomy," said EE Chief Executive, Olaf Swantee. "Thesecompetitors only want to put up roadblocks, while we want tobuild motorways for the UK".
Patterson said Britain needed a digital champion willing andable to invest in ultrafast broadband and 5G.
He said rival companies would be able to benefit and competethrough highly regulated, equal access to the Openreach network,and wholesale access to the EE mobile network.
Analysts said the early skirmishes were indicative of thesize of the deal and the key role BT plays in the wider market.
"As the deal comes close to finalising, rivals will becalling for lower prices, greater access to BT's network andeven a full demerger of Openreach," CCS Insight analyst PaoloPescatore said.
"While there are merits of BT's acquisition of EE,regulators will be duty bound to listen to the comments of theircompetitors who will feel less positive about the transactionand the increasing monopolisation of the telecoms sector."
European Competition Commissioner Margrethe Vestager said onMonday she was wary of too many mergers in the telecoms sector,warning that consumers could end up with higher bills and lessinnovative companies.
"Incumbent operators argue that if they cannot merge withtheir rivals in the same country they will be unable to increasetheir investment. I've heard this claim quite often, but I havenot seen evidence that this is the case," she said.
"Instead, there is ample evidence that excessiveconsolidation may lead not only to less competition and moreexpensive bills for consumers, but that it also reduces theincentives in national markets to innovate."($1 = 0.6367 pounds) (Reporting by Paul Sandle; Editing by Elaine Hardcastle)
