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The UK’s largest fixed-line telecommunications company and its biggest mobile operator are set to merge. On paper, this appears to be a straightforward and logical combination of two market-defining players. In practice, however, the implications are far more complex.
The Competition and Markets Authority (CMA) has approved BT’s acquisition of EE, concluding the transaction does not pose a competitive risk to the wider market or to consumers. That finding raises questions about whether regulators have fully considered the broader competitive landscape.
Unlike the proposed merger of O2 and Three, the EE takeover does not reduce the number of distinct mobile network operators. But a purely numerical view misses deeper competition issues, particularly as telecoms services increasingly come as bundles — double, triple and quad play offerings. It is in the bundling market where a combined BT/EE would exert substantial influence.
BT is more than a company selling landlines and broadband to households and businesses. As the former state telecommunications monopoly, BT still controls the country’s primary national network and the crucial “last mile” infrastructure that connects homes and businesses.
That national infrastructure has been organised under BT’s Openreach subsidiary. Openreach is intended to act as a customer-agnostic gatekeeper, providing equivalent access to the national network and exchanges for BT and its competitors alike.
Added to this is EE and its physical cellular network. EE operates its own branded services — EE, Orange and T-Mobile — and supports multiple mobile virtual network operators (MVNOs). According to market comparisons, EE hosts the majority of major virtual networks in the UK.
Given the current market structure and infrastructure ownership, most providers of fixed-line, broadband or mobile services depend in some way on assets owned or managed by BT. Alternative routes to market that bypass BT are limited and often costly.
At first glance, the ownership of Openreach might seem separate from acquiring EE’s mobile network. This is not a return to a state-run monopoly, but the situation feels uneasy because regulation requires BT’s national network to remain open to all to preserve competition. Put plainly, BT now controls a significant share of both fixed and mobile access networks across retail and wholesale markets.
Having worked inside Openreach, in other parts of the BT group and across the telecoms sector, I previously concluded that forcing BT to sell Openreach would not be in the national or industry interest.
Fully separating Openreach from BT would be expensive, time-consuming and highly disruptive. It would harm BT and could significantly affect every communications provider that relies on Openreach to access the national network. Even as an independent entity, Openreach would remain the primary platform through which operators connect customers to the national infrastructure.
That assessment assumed BT did not control a large mobile network. With the clearance of the EE deal, regulators face a more difficult balancing act. The prospect of a merged O2 and Three would have offered a counterweight to a mobile-capable BT, offsetting some of the additional market power created by the BT/EE combination. But the O2/Three merger now looks likely to be blocked, with regulators publicly expressing concerns. Recent commitments from Three — including a proposed price freeze if their deal proceeds — may mitigate some regulatory worries, but uncertainty remains.
If O2 and Three are prevented from merging, the prospect of a strong rival to a mobile-enabled BT is diminished. While breaking up Openreach still seems an unattractive short-term solution for the industry, it may become the most practical remedy for regulators seeking to rebalance market power. Such a divestiture would be painful and disruptive but could effectively address the competitive distortion created by an enlarged BT.
Ultimately, the union of BT and EE—without a comparable shift elsewhere in the market, such as a successful O2/Three merger—creates a telecoms powerhouse. That combined entity would span fibre, copper and wireless networks and would touch nearly every part of the UK’s telecommunications ecosystem, including the pathways competitors rely on. Regulators describe this risk as a “substantial lessening of competition” (SLC).
Viewed another way, if O2 does not merge with Three, maintaining a balanced market may require BT to relinquish Openreach.
Demerger of Openreach would help restore competitive balance, but it would be a painful and complex process that would take time to implement and would have significant short-term consequences for the industry.
What is your view on the BT/EE merger from a competition perspective? Share your thoughts in the comments.