BT's consideration of EE's £12.5bn price tag is proof of how keen it is to re-enter the mainstream mobile arena, according to TechMarketView (TMV).
Last night, the telecoms giant announced it has entered into exclusivity agreement with Deutsche Telekom and Orange in relation to a possible acquisition of its UK mobile business EE. The consideration period will last for "several weeks" so it has time to complete its due diligence. As part of the proposal, EE's purchase price was placed at £12.5bn which will be payable as both cash and new BT shares.
TMV said the hefty price proves BT's intentions in the mobile space.
"The indicative price for the deal is £12.5bn, that's 7.9x EBITDA or over £500 per customer, so BT looks prepared to pay well to get back into mainstream mobile where growth and margins are under pressure," said research director Peter Roe. on the HotViews blog. "This is where the hard work starts as the stakeholders work out how to combine the two businesses without destroying value."
BT claimed that should the deal go ahead, it would expect "significant synergies" to be made, mainly through "network and IT rationalisation", back-office consolidation and savings on procurement, marketing and sales costs.
But Roe added that this is not always a simple task.
"Securing IT savings on a merger is notoriously difficult," he said. "EE is already an amalgam of two companies' systems and linking into BT's system stack will take time and effort.
"We would expect the two operations to be run as separate entities for some time, unifying the brands and sorting out the systems over the next couple of years. Realising earlier savings could prove difficult and risky."
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