Five things you need to know about BTs bid for EE Want to know how BTs potential purchase of EE will affect you? BT has recently confirmed its bid to buy mobile telecoms group EE for £12.5 billion. The company has been interested in expanding its mobile services for a while, and was rumoured earlier in the year to be investigating O2 as a potential purchase. This merger would allow BT to deliver a fully-functional ‘quad-play’ service. This quad-play package involves the bundling of home phone, broadband, TV and mobile contracts into one deal - ostensibly allowing big savings. It’s a system that’s proving increasingly popular, particularly in overseas markets. But what makes this different to the hundreds of corporate deals and takeovers that happen every day? As it happens, quite a lot. Read on to find out five things you need to know about BT’s purchase of EE. 1. BT will become the biggest service provider in the UK The first result of this purchase would be that BT will own a large share of the market. It already controls 31% of the fixed-broadband market, according to Ofcom figures, as well as 37.6% of home phone traffic. This merger would add EE’s 33.8% control of the mobile sector to their already-inflated portfolio. The similar merger of Orange and T-Mobile - that birthed EE - in 2010 saw the company take an immediate and commanding market lead. The company dominated the industry to the extent that in the 2012 auction of 4G spectrum bandwidths, Ofcom had to step in to prevent smaller companies like Three from being muscled out altogether. Rival companies are already complaining that this deal would provide BT with an unfair competitive advantage. Our own Barry Collins has previously said that “no sane regulator would give [this deal] the green light” when it was first rumoured. 2. Customer service could get even worse Both companies are ranked lowest for customer service in their respective fields, and are widely derided for their poor handling of issues and complaints. Of special note is BT: not only did Ofcom reveal their satisfaction rate to be “significantly lower than average”, “They also performed below average on specific customer service measures including speed and ease of getting through to the right person, time taken to handle issues and offering compensation or a goodwill payment.” BT previously admitted that it struggled to cope with the rush of customers following the launch of BT Sport. Attempting to integrate EE’s 24.5 million subscribers with its existing services could provide a similar scenario, and therefore put BTs customer service to the test - potentially resulting in a further drop in customer satisfaction standards. 3. Price rises could be imminent Another potential downside of the deal is the looming spectre of price increases. £12.5 billion is a lot of money, and although some of it will be paid in the form of shares, around £7 billion will still need to be paid by the company. BT said it expects significant savings from cuts to services such as its IT department, thanks to a more centralised service. However, these cuts have only been valued at £5 billion according to a Barclays analyst, and it’s not unlikely that BT will try to split the cost of its new purchase with its subscribers. It wouldn’t be the first time customers bills have felt the sting of a new acquisition either. The live football rights required by BT Sport (for which the company is still facing substantial payments) saw prices rise for end users of its home phone and broadband services. Although the company never admitted a direct link between the addition of BT Sport and the price hikes. The increases were widely unpopular, and its a situation that could be repeated here. 4. It could be even harder to change networks According to Technology Media Telecoms analyst Dan Ridsdale, one side effect of the deal is that it will “reduce churn”. In layman’s terms, this refers to the number of contractual customers who leave a service, and is frequently used as a measure of market satisfaction. This is because it’s incredibly difficult to change provider for one aspect of a bundled contract, particularly since ‘unbundling’ it will invalidate any savings. For example, if you’re unhappy with the broadband aspect of your quad-play contract, switching to Talk-Talk or Virgin whilst keeping the rest of your services is likely to be incredibly difficult. This could allow BT to retain customers for longer, even if they are not happy with the service. 5. It’s not definite The most important thing to remember, of course, is that it’s not confirmed yet. BT has confirmed its bid, and EE has accepted it, but it still has to be approved by regulators. Ofcom is, as Barry Collins noted, “notoriously spineless”, but its reservation of certain 4G spectrums for smaller competitors like Three show an encouraging unwillingness to let any one company gain too much of a market hold.
Posted on: Thu, 18 Dec 2014 09:27:40 +0000
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