Orange Enters Definitive Agreement with BT Group over EE - Analyst Blog

French global telecommunications service provider, Orange ( ORAN ), expects to complete its operational restructuring process in Europe in 2015 itself. Recently, BT Group Plc. ( BT ) entered into a definitive agreement with Orange and Deutsche Telekom AG to acquire 100% stake in U.K.-based wireless operator EE. Notably, the deal is valued at GBP 12.5 billion (approximately $19.5 billion).

The cash and stock deal is designed in such a way that Orange will control a mere 4% of BT Group but will receive a higher cash portion, while Deutsche Telekom will obtain a 12% stake but a lesser portion of cash. BT Group expects the takeover to result in cost and capital expenditure synergy of GBP 360 million per annum from the fourth year post the completion of the deal.

BT Group has been trying all means to foray into the wireless market of the U.K. and had considered the acquisition of EE or O2 -- a division of Telefonica S.A. ( TEF ). However, the company finally decided on taking over EE. Competition in the U.K. wireless market intensified this year with the expansion of 4G LTE and LTE-Advanced network by EE and Vodafone Group Plc. ( VOD ).

EE currently serves 24.5 million customers (excluding MVNO and M2M users), of which more than 5.6 million are LTE customers. Acquisition of EE will place BT Group in a formidable position in both wireless and fixed broadband markets.

Meanwhile, Orange has pinned all hopes on the proposed acquisition of Jazztel Plc., which offers broadband services along with fixed-line and mobile phones services to enterprise and consumer markets in Spain. The company boasts around 1.4 million broadband and fixed-line connections along with 1.16 million mobile users.

Hence, the deal will help Orange consolidate its position in the highly saturated Spanish telecom sphere. Notably, Orange will expend around $4.4 billion for this takeover and proceeds from the EE sale will help the company fund the transaction.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

TELEFONICA S.A. (TEF): Free Stock Analysis Report

BT GRP PLC-ADR (BT): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

ORANGE-ADR (ORAN): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.