BT’s deal to buy EE a win-win… maybe

BT’s $19.1 billion (£12.5 billion) purchase of mobile operator EE this week may be the kickoff to a major reconfiguration of the United Kingdom’s telecommunications landscape.

The deal for EE – the nation’s largest mobile service provider – makes BT the dominant player in the market, one competitors say will be tough to fight.

As Vodafone CEO Vittorio Colao – himself no stranger to mergers and acquisitions – said: “There are four Davids and one Goliath. It will be double the size of the nearest competitor.”

The result? “The new, old BT,” Colao told the BBC, referring to BT’s former position as a government-run monopoly.

If regulators approve the merger, BT will be the U.K.’s largest provider of Internet, TV, mobile and fixed-line phone services. It already operates the U.K.’s largest fiber broadband network.

For consumers, the deal potentially means lower prices… as long as they subscribe to a big enough bundle of services. Quadplays generally deliver reduced rates on Internet service, for example, but require users to take the additional services as well. Breaking up the bundle, however, often means higher prices, sometimes significantly.

Rivals TalkTalk and Vodafone are asking that regulatory officials step in and force BT to spin off its Openreach fixed line operation, which is BT’s infrastructure division.

Colao told the BBC that, “Ideally, a structural separation of Openreach would be optimal.”

BT, meanwhile, is spinning the deal as a win-win for its shareholders and for its customers.

In a press release, BT said the deal would save it $549 million (£360 million) a year in operating costs and capital investment within the next four years. And, it said, the combined entity should produce about $2.44 billion (£1.6 billion) a year in additional sales.

“This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them,” noted Gavin Patterson, BT’s chief executive.

For customers, meanwhile, BT is saying the merger of EE and BT “will provide customers with innovative, seamless services that combine the power of fiber broadband with WiFi and advanced mobile capabilities.”

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn