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EE is the UK’s largest mobile network, but according to its French owners the current situation isn’t going to work out.
French company Orange is joint owner of EE with Germany’s Deutsche Telekom. But according to Orange Chief Executive Stéphane Richard, speaking at a Morgan Stanley conference in Barcelona, “The 50-50 situation isn’t a long-term scheme.”
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However, nothing is likely to change for the moment: “Don’t expect anything spectacular in the short term”, said Richard according to the Wall Street Journal.
“We have always expected that EE’s owners Orange and Deutsche Telekom will exit the company in the long term”, says industry analyst Kester Mann of CCS Insight, “via IPO or sale to a strategic investor. A 50/50 joint-ownership of the company was never a long term solution in our view and a possible sale could come back on the agenda next year.”
That desire to back away from EE isn’t down to any failing on EE’s part: in fact the network is doing well. Kester Mann suggests instead that the European owners want to look closer to home: “Orange is under pressure in its home market of France due to a price war initiated at the start of 2012. Meanwhile Deutsche Telekom is investing strongly in Germany due to heavy competition and has encountered tough challenges across central and eastern Europe.”
EE was formed in 2010 by the merger of the UK versions of Orange and T-Mobile, which continue as 3G networks in their own right while the EE name was adopted for the UK’s first 4G network. When the two networks combined the new company leapfrogged rivals to become Britain’s biggest phone network; collectively, EE has over 30 million customers.
Addressing “strategic issues”, Stéphane Richard indicated that EE would continue to move towards offering a wider range of products. The trend in the industry is for companies to offer broadband and TV options as well as mobile contracts, with rivals such as Virgin Media and BT known as “triple-play” companies for offering those three types of service. As such, EE recently launched the EE TV set-top box.
“The demand for multiplay services remains unproven in the UK”, cautions Kester Mann, but should demand grow he expects to see more mergers and acquisitions by companies looking to broaden their horizons — especially when BT launches its mobile network in the first half of next year.
Not everybody is so keen on converged services, however: speaking at the same conference, Telefonica’s chief operating officer Jose Maria Alvarez-Pallete would consider selling O2 if the market moved in that direction. “Virgin and others already have converged offers, but we don’t see a major appetite from consumers”, said Alvarez-Pallete, as reported by Reuters. “If the market goes convergent then we will need to evaluate our options”.
