BT has finalised a deal to buy the UK's largest mobile phone operator EE from its parent companies Orange and Deutsche Telekom for £12.5 billion in cash and shares, seeing the telecoms giant re-enter the mobile phone market after more than a decade.

The deal, which BT hopes will close by the end of the year, will give Deutsche Telekom a 12% stake in company and the right to appoint one board member, while Orange will get more cash and a 4% stake in BT.

BT says it will raise £1bn to fund the deal through a combination of debt financing and issuing new shares. The company says that after four years it expects to make £360 million capital expenditure savings as a result of the merger.

BT CEO Gavin Patterson welcomed the deal:

"This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them. The UK's leading 4G network will now dovetail with the UK's biggest fibre network, helping to create the leading converged communications provider in the UK. Consumers and businesses will benefit from new products and services as well as from increased investment and innovation."

CEO of EE, Olaf Swantee was equally positive about the move:

"Joining BT represents an exciting next stage for our company, customers, and people. In the last few years alone, we have built the UK's biggest, fastest and best 4G network, significantly advancing the digital communications infrastructure for people and businesses across Britain."

BT will now join Virgin Media and Talk Talk as the companies offering customers the quad-play package of broadband, landline, TV and mobile, something it says will generate "revenue synergies" with a total value of around £1.6bn:

BT expects to generate revenue synergies by providing a full range of communications services to the combined customer base. This includes BT selling its broadband, fixed telephony and pay-TV services to those EE customers who do not currently take a service from BT. BT also expects to accelerate the sale of converged fixed-mobile services to BT's existing consumer and business customers and offer new services, using both companies' product portfolios, skills and networks," the company said in a statement announcing the deal.

Sky is set to enter this market in 2016 when it launches its own mobile phone network thanks to a deal struck with Three which was announced last week.


The deal will first need to be scrutinised by the Competition and Markets Authority (CMA) in the UK, which BT says could begin after the company's extraordinary general meeting in April. The company said it was hopeful the deal would be finalised by the end of 2015.

EE, which just announced its latest set of financial results, is the UK largest mobile operator with 31 million subscribers and with 7.7 million of those using EE's 4G network, it also boasts the largest 4G subscriber base in Europe.

The deal comes at a time of huge transition in the UK mobile phone sector following last month's announcement that Hong Kong's Hutchison Whampoa agreed to buy O2 UK for up to £10.25bn, to merge it with its own Three network to create what will then be the biggest UK mobile operator in terms of subscriber base.