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* To raise 1 bln stg through share placing
* Agrees 12.5 bln stg deal with Orange, Deutsche
* Shares up 4.6 percent to 14-year high (Adds EE, DT comments, advisers, updates shares)
By Paul Sandle and Kate Holton
LONDON, Feb 5 (Reuters) - BT has finalised a deal tobuy mobile operator EE for 12.5 billion pounds ($19 billion) andnow faces a contested approval process to seal its status asBritain's dominant communications company.
The deal, bringing together BT's more than 10 million retailcustomers and EE's 24.5 million direct mobile subscribers, willbe funded by a 1 billion pound share issue and 2.4 billionpounds of new debt, and was warmly received by investors whosent its shares to a 14-year high.
But its rivals have already called on regulators tointervene, wary that the fixed-line market leader and maininfrastructure provider could abuse its position and reducecompetition.
BT had spent the last few weeks in exclusive talks with theowners of EE, Orange and Deutsche Telekom,about a deal. The German and French companies will hold 12percent and 4 percent stakes in BT, respectively.
"This is a major milestone for BT as it will allow us toaccelerate our mobility plans and increase our investment inthem," BT Chief Executive Gavin Patterson said on Thursday.
BT had 38 percent of the fixed-line market at the end of2013, while EE had a third of the mobile market, according toOfcom and EE.
Patterson said he expected the deal to be scrutinized inBritain, rather than Brussels, and did not expect competitionauthorities to impose stringent remedies.
Britain would still have four mobile networks, he said, andBT would be no different than European peers like Orange,Deutsche Telekom and Telefonica, with both fixed andmobile networks. "Fundamentally we believe this will pass mergercontrol, and we will be pushing for that very quickly."
But there will be only three players if Hutchison Whampoa completes a 10.25 billion pound deal to buy the 02business from Telefonica to become the biggest mobile player.
Rivals such as TalkTalk have called on regulatorsto force BT to spin off its Openreach division, which enablesother telecoms companies to access its network.
HEAD START
Vodafone Chief Executive Vittorio Colao, talking asthe group reported its third-quarter results, said he would liketo see Openreach separated from the wider group.
EE had a head start over rivals in launching 4G services inBritain in late 2012 and it remains the clear leader, with 7.7million customers at the end of 2014.
Chief Executive Olaf Swantee, who said he would stay on forthe regulatory process at least, said the group was on track tohave 13.5 million by the end of 2015, and EE was seeing"incredible appetite" for additional services like broadband andTV from customers.
Joint owner Deutsche Telekom will become the largestshareholder in BT and will retain a position in a market whereit could have struggled as a mobile-only player.
Shares in BT were trading up 5 percent at 445 pence by 1429GMT, topping the FTSE 100 index.
Patterson said customers could expect to see some savings bybuying a package of services from BT, but stopped short ofsaying BT would launch a price war in mobile.
"If you look across the continent, prices in general havecome down to some extent when fixed and mobile products are soldas a bundle," he said. "So I expect some of the savings we areable to make by simplifying the network will be passed on to theconsumer."
Finalising the terms of the deal means BT can turn its focusto the English Premier League soccer rights auction, the biggestbattleground in pay-TV which kicks off on Friday and is expectedto pit the 169-year-old BT against Sky.
BT said it would achieve combined operating cost andinvestment synergies of around 360 million pounds per year, fouryears after the deal completes, and revenue synergies with a netpresent value or around 1.6 billion pounds.
Analysts at Raymond James said the synergies were higherthan they expected, from a company with a good track record ofhitting its spending targets.
BT was advised by Goldman Sachs, J.P. Morgan Cazenove andPerella Weinberg, while Morgan Stanley and Bank ofAmerica-Merrill Lynch advised Orange and Barclays worked forDeutsche Telekom.($1 = 0.6558 pounds) (Editing by Keith Weir and David Holmes)
