- Deutsche Telekom will retain a c.12 percent shareholding in BT, the prospective leading converged operator in the UK
- Synergy potential with an estimated net present value of GBP 4.6 billion
- Further step of value creation through portfolio optimisation
Deutsche Telekom and the French telecommunications operator Orange S.A. have reached an agreement with the British telecommunications operator BT Group plc. on the sale of their UK joint venture EE. Upon closing of the transaction, Deutsche Telekom will become the largest shareholder in BT with a stake of c. 12 percent.
Tim Höttges, Chief Executive Officer of Deutsche Telekom, highlighted the significant value creation for the Deutsche Telekom group and said: "The transaction is much more than just the creation of the leading integrated fixed and mobile network operator in Europe's second largest economy. We will be the largest individual shareholder in BT and are laying the foundations for our two companies to be able to work together in the future. This is another example of the consistent and successful execution of our portfolio optimisation strategy."
Gavin Patterson, Chief Executive Officer of BT, said: "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. The deal provides an attractive opportunity for BT to generate considerable value for shareholders, with significant operating and capital investment efficiencies supported by our tried and tested cost transformation activities. The enlarged BT will offer significant opportunities for employees as we lead the creation of a world class digital infrastructure for Britain."
Stéphane Richard, Chief Executive Officer of Orange, said: "This is a landmark transaction for Orange and the next natural step in the evolution of BT and EE. We are confident the combined company will go on to provide new and exciting services to its customers as the demand for data and connected services continues to grow."
The agreed purchase price of GBP 12.5 billion for EE is an attractive valuation at 7.9 times the operating EBITDA of 2014. Depending on BT’s share price and other factors at closing, Deutsche Telekom may receive a cash payment beside the 12 percent stake in BT. Deutsche Telekom will retain exposure to the potential synergies. A lock-up period of 18 months has been agreed for the BT shares of Deutsche Telekom.
Deutsche Telekom will be given a seat on BT's Board of Directors. Based on its experience in other markets, Deutsche Telekom will look to contribute to the successful integration of EE into BT and the development of fixed-mobile convergent products.
The business combination will make BT the number one on the dynamic UK market as an integrated provider in fixed network and mobile communications. In financial year 2013/14 (March 31), the company generated revenue of GBP 18.3 billion and an adjusted EBITDA of GBP 6.1 billion. EE currently has more than 30 million customers and in 2014 generated revenue of GBP 6.3 billion with an adjusted EBITDA of GBP 1.6 billion. The two companies already work together in a number of areas. For example, EE offers its customers broadband products in the fixed network on the basis of lines leased from BT, while BT offers mobile products that use EE's 4G network, the leading network in the United Kingdom.
The business combination with EE is expected to create synergies with a net present value of GBP 4.6 billion (after integration costs) in areas such as sales, marketing, administration, and cross- and up-selling in connection with integrated products combining mobile, fixed-network services, and TV. The transaction will offer BT an attractive market position, marked by convergent products for consumers, integrated solutions for business customers, outstandind customer proximity thanks to UK-wide shop presence, and attractive content and TV services and leading network quality.
The transaction requires approval of BT's shareholders and the responsible authorities. Closing is expected before the end of March 2016.
Barclays and Citi acted as financial advisors and Clifford Chance acted as legal advisor to Deutsche Telekom.
About Deutsche Telekom
Deutsche Telekom is one of the world's leading integrated telecommunications companies with over 142 million mobile customers, 31 million fixed-network lines and more than 17 million broadband lines (as of December 31, 2013). The Group provides fixed-network, mobile communications, Internet and IPTV products and services for consumers and ICT solutions for business customers and corporate customers. Deutsche Telekom is present in around 50 countries and has approximately 229,000 employees worldwide. The Group generated revenues of EUR 60.1 billion in the 2013 financial year – more than half of it outside Germany.
EE is the largest and most advanced digital communications company in Britain, delivering mobile and fixed communications services to consumers, businesses, government and the wholesale market. EE has approximately 15,000 employees and 580 retail stores, and serves more than 30 million customers across its mobile, fixed and wholesale businesses. EE runs the UK's biggest, fastest and most reliable mobile network, pioneering the UK's first superfast 4G mobile service in October 2012. EE's 4G coverage today reaches more than 80% of the UK population. EE's superfast fibre broadband service covers 54% of the UK population, and ADSL broadband service covers 98.7% of the population. In the last few years, EE has received extensive independent recognition including being ranked the UK's best overall network by RootMetrics®, Best network at the 2014 Mobile News Awards, Fastest Network at the 2013 uSwitch Awards, Best Network at the 2014 Mobile Choice Consumer Awards and What Mobile Awards 2013, Network Innovation at the 2013 Recombu awards and Best Network for Business at the 2013 Mobile Industry awards.
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. Forward-looking statements are based on current plans, estimates, and projections. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. If these risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be met. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any responsibility for updating forward-looking statements by taking new information or future events or other matters into account. If a transaction is agreed, approval by BT’s shareholders will be required as a condition of the purchase.