Breather for BT as telecom regulator gives green signal in 12.5B EE buyout deal

UK-based BT Group Plc is well on the way to close the GBP 12.5-billion buyout deal as Ofcom, the UK's communications regulator, favored the British multinational telecommunications services company in its 65-page submission to Competition and Markets Authority (CMA).

Allaying fears expressed by other telecom companies, Ofcom said in the report that all measures were subject to regulatory powers. Now, CMA will have to rule on the deal and most probably the competition watchdog will honor the advice of the industry regulator. 

On the other side, rival telecom companies express their concerns that the deal would create a telecom giant and this will ease out the competition in the market. The BT and EE deal will bring the largest provider of mobile, the internet and home phone together. Ofcom informed CMA that all the issues would be addressed by measures under the regulatory power. 

BT and EE are largest telecom services providers in the UK. After the submission of Ofcom's report to CMA, BT's spokesperson said: "We welcome Ofcom's submission to the CMA and that they have no major concerns. We're confident that the acquisition is good for UK consumers and businesses."

However, Ofcom also warned in its submission that the new company emerging after the deal would dominate 'mobile backhaul' process. Mobile backhaul is a part of the signal process where mobile signal passes through underground cables before being transmitted over the airwaves.

The mobile backhaul would be in favor of BT only as it has the largest network, on which other telecom companies buy space on lease for transmitting their calls and data. 

Though BT also leases space on its own network on par with other telecom companies, the British telecom major has advantage and incentive that might lead to hamper the advantages of rivals. There could be discrimination in leasing space to rival telecom companies as well.  

Earlier, the other telecom players expressed their concerns with telecom watch dog that the deal would create a giant that would kill the competition in the market thus depriving consumers of major and equal benefits.

Considering these fears, CMA also opined that there would significant competition concerns as the merger would impact the retail mobile market. Then BT had sought fast-track probe into EE deal. Subsequently CMA in June granted fast-track process to BT so that more comprehensive assessment on the proposed deal and its impact on mobile and fixed line segments in the UK. 

Taking the large infrastructural network of BT, the antitrust watchdog opined that the deal would lessen the competition. There were also problems related to call services of small telecom companies that have leased space on EE network.

Other telecom companies such as Vodafone, Os and Three use the BT's network. BT and EE are major suppliers at the wholesale level, whereas other companies have competition at the retail level. Other telecom companies argue that the deal will ease out the incentives and advantages they have on network lease and impact the retail market in a negative way.

Reacting to these allegations, BT assures that it wouldn't involve in changing the business transactions that would put other telecom companies at disadvantage level. 

BT also highlights its track record as a wholesaler in offering space on its infrastructure network to all the operators on equal platform.

However, CMA wanted to wait till the two probe reports is submitted.