BT and TalkTalk go to war over EE deal

Both telcos are wooing the regulator in their own sweet way.

by Rachel Savage
Last Updated: 08 Oct 2015

All’s not fair in telecoms and war – at least if you’re TalkTalk, which is doing its level best to throw grenades in the path of the steamrolling juggernaut that is the BT-EE deal.

The two traded fire yesterday, as BT and EE released an ‘independent’ report on the ‘benefits’ of the £12.5bn takeover. Their aim is to head off the Competition and Markets Authority, which is currently investigating ‘significant’ concerns about the mega-deal.

BT’s boss, the immaculately coiffed Gavin Patterson, said in a statement the acquisition would create a ‘true UK digital champion’. He also claimed there was ‘no evidence’ the tie-up would mean higher prices for consumers, telling the Telegraph Three’s purchase of O2 was more likely to harm competition than a broadband provider buying a mobile operator.

EE boss Olaf Swantee then turned the guns on rivals. ‘These competitors only want to put up roadblocks, while we want to build motorways for the UK,’ he said, preferring ‘to stand still and sweat their existing assets rather than invest in the future.’ (It’s not only MT that likes a good metaphor.)

While Vodafone (the object of Virgin Media owner Liberty Global’s desires at the moment) stayed schtum, FTSE 250 telco TalkTalk came out swinging.

‘It is unsurprising that BT and EE claim that their merger would deliver benefits for consumers, but the evidence of other markets and other industries does not support this,’ it said in a statement. ‘Quite simply, consolidation leads to reduced competition and a reduced incentive to innovate and, crucially, higher prices.’

Unsurprising indeed – the report’s author Rob Kenny, co-founder of consultancy Communications Chambers, admitted at its launch he’d only been asked to look at the acquisition’s benefits, so hadn’t examined any of its potential drawbacks.

But TalkTalk, which has previously called for BT’s broadband network unit Openreach to be spun off, is still very much on the back foot, as one of the smaller ‘quadplay’ (landline, mobile, TV and broadband) providers (at least in terms of market capitalisation - it currently has more TV customers than BT). Investors think so too: it’s shares were down more than 1% to 375p in mid-morning trading, while BT’s were up more than 2% to more than 71p.

Only the CMA really has the power to pierce BT’s EE-reinforced armour. It could make itself popular with BT's rivals by forcing it to spin out Openreach. But that would be a pretty big ask given the FTSE 100 company has to charge itself the same as its competitors to access the network. The juggernaut may well keep on rolling.

Read more - Taking on Sky at its own game: BT chief executive Gavin Patterson

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