BT enters exclusive talks with EE over mobile buy

Telecoms group BT has entered exclusive talks with Deutsche Telekom (DT) and Orange about buying their mobile operation EE for £12.5bn, the company said on Monday.The period of exclusivity will last several weeks, allowing BT to complete its due diligence and for negotiations on a definitive agreement to be concluded, it said in a statement.The news may come as a surprise to some analysts, given that BT had been widely tipped to favour O2 as a potential tie-up partner.But either deal should help BT to achieve its ultimate aim of re-entering the mobile phone market more than a decade after it left it when it hived off its MMO2 business, which was formerly known as BT Cellnet, in 2001.BT said the proposed deal with EE would allow it to speed up its existing mobile strategy combining broadband, wi-fi and 4G."While continuing these exclusive discussions, BT will progress its own plans for providing enhanced fixed-mobile converged services for businesses and consumers, in line with previous announcements. It remains confident of delivering on these plans should a transaction not take place," BT said.The payment for EE would be a combination of cash and new BT ordinary shares issued to both DT and Orange. Following the transaction, DT would hold a 12% stake in BT and would be entitled to appoint one member of the BT Board of Directors. Orange would hold a 4% stake in BT.BT said it expected to make significant savings mainly through network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs.In addition, it expects revenue savings through selling fixed-line services to those EE customers who do not take a service from BT and by accelerating the sale of converged fixed-mobile services to BT's existing consumer and business customers.EE has 24.5m direct mobile customers and reported adjusted pre-tax earnings before interest, depreciation and amortisation of £1.59bn for the 12 months to 30 June.BT's shares closed up 0.6p or 0.15% at 398p in London.