Why BT buying O2 or EE would be a disaster

BT has been offered the option to buy two British mobile networks, believed to be O2 and EE. 

BT says it has “received expressions of interest from shareholders in two UK mobile network operators, of which one is O2, about a possible transaction in which BT would acquire their UK mobile business”. Reports suggest that the other operator is EE, the UK’s largest mobile network following the merger of T-Mobile and Orange. 

It would be something of a homecoming if O2 did end up back in the hands of BT. O2 started life as Cellnet, a joint venture between BT and Securicor, which eventually became wholly owned by BT in 1999. BT Cellnet was spun off in 2002, when it was renamed O2, before being acquired by Telefonica in 2005.

BT and EE have also worked together in the past, most notably during a trial of 4G technology in Cornwall, which saw EE provide a mobile backfall for those who couldn’t be reached by BT’s fibre network, but the partnership was eventually dissolved. 

BT, which won some 4G spectrum in the 2012 auction, was already making its own plans to re-enter the mobile market. The company was planning to use its vast network of Wi-Fi hotspots as a fallback in areas not covered by 4G, but was having some difficulty with managing call handling via the Wi-Fi network. 

“We continue to develop our own plans for providing enhanced mobile services to business and consumer customers, in line with our previous announcements,” BT said in its statement. “We remain confident of delivering on these plans and have also been exploring ways of accelerating them, including assessing the merits of an acquisition of a mobile network operator in the UK.”

A Reuters report says Telefonica would be prepared to sell O2 for a 20% stake in BT, which would value O2 at around £6 billion. EE, which commands about a third of the UK mobile market by itself and has the biggest 4G network of any provider, would likely command a higher price. 

Opinion – Barry Collins 

Ten years ago, the British mobile phone market was the model of healthy competition. Vodafone, O2, T-Mobile and Orange had around 20% of the market each, and Three was keeping them all on its toes with its (then cutting edge) 3G network, which was offering higher data speeds at lower prices. 

Now, competition has been eroded. The merger of T-Mobile and Orange has created a runaway leader with a third of the market, O2 and Vodafone have increased their market share, and Three is just about clinging on. Telecoms regulator Ofcom even had to guarantee Three some spectrum in the 4G auction, just to make sure the company wasn’t bullied out of the market.

The news that O2 or EE are likely to fall into the hands of another telecoms behemoth – BT – is even more worrying. Rivals are – with some justification – already complaining that BT has way too much power in the fixed broadband market. Now, it could get a stranglehold on the mobile market, too, especially if it lands EE.

Even the notoriously spineless Ofcom must be concerned about one company having such influence over the entire telecoms market. BT simply cannot be allowed to dominate both fixed line and mobile. No sane regulator would give either of these potential deals the green light. If only we had a sane regulator…