BT Claims EE Acquisition Will Result In Lower Wireless Prices
BT Group has outlined its planned acquisition of EE (formerly Everything Everywhere) for £12.5 billion to investors earlier this week, claiming that the acquisition would drop mobile prices.
In an 104 page document sent to shareholders, BT goes over the advantages, changes and potential difficulties of acquiring the largest carrier in the UK. BT is hoping that investors will vote in favor of the acquisition, allowing the broadband and telephone provider to add wireless networks onto its list of services.
Having wireless service would allow BT to offer quad-play services, something both Virgin Media and Sky are hoping to achieve with partnerships and mobile virtual network operators. If BT can get a hold of EE, it would put them at a significant advantage in terms of cost for wireless and range of service.
BT claims that the acquisition would lower the cost of wireless prices, which has apparently been dropping in the past few years. We are not sure if BT is reading from the same price list that most customers are, considering phone prices can shoot as high as £60 per month for unlimited wireless with the purchase of the iPhone 6 Plus.
The acquisition would also lower the operational costs due to EE’s profit margin. Even though BT did not outline it, there are plans in the works to layoff a large amount of staff and remove the EE brand, to cover some of the operational costs.
EE’s support staff will most likely be removed or merged with BT’s own, alongside its networking staff. BT already hires thousands of staff working on networks – it most likely will not need another few hundred from EE.
“The acquisition is expected to generate significant operating cost savings and additional capex savings,” said BT in the statement. “Together, these are expected to reach approximately £360 million per annum in the fourth full year post-Completion. Integration costs to achieve these savings are expected to be around £600 million. The savings are equivalent to a net present value of around £3.5 billion before integration costs, or around £3 billion after integration costs.”
EE should bring in £1.4 billion in operating profit for BT following the acquisition.
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