Persistent speculation about the UK’s largest cellco, Everything Everywhere, could be sold off has gained focus, with reports that former CEO Tom Alexander is mounting a bid backed by private equity. That would see a buy-out, potentially valued at €8bn, from the operator’s parents Deutsche Telekom and France Telecom.
According to The Financial Times newspaper, Alexander has held discussions with private equity groups such as Apax and KKR to support the bid. After heading the joint venture during its formation ‘ merging the UK arms of T-Mobile and Orange ‘ he left last summer, making way for Olaf Swantee. He cited the need for time off, though analysts were more likely to point at the disappointingly slow progress of the joint venture in its early days, in terms of efficiencies and market share growth.
There has been speculation, almost since EE was formed, that one or both of its parents would eventually look for new investors or a complete exit. France Telecom recently hinted at a possible IPO in future, while Deutche Telekom is trying to reduce its debt amid the eurozone crisis and is thought to be interested in selling its stake.
Any deal would be complex and unlikely to be agreed any time soon, plus capital will be hard to raise in the current economic climate in Europe. Sources believe Alexander has already been talking to possible backers since February.
Should he succeed, he would be expected to dump the EE and T-Mobile brands and maintain an agreement with France Telecom for its Orange label, regarded as the best of the cellco’s brands in terms of market profile and recognition. The new and much derided EE name is mainly used for retail stores. The combined group has 27m customers.
The mooted acquisition would be one of the UK’s largest ever private equity deals, though falling behind the £11bn takeover of Alliance Boots in 2007, which also involved KKR.
Speaking in a conference last week, France Telecom’s CFO Gervais Pellissier pointed to factors which will loom large in any negotiations, urging EE’s owners to distinguish between the ‘short term value we could get from an IPO or a sale and the long term value of being number one in the UK’. The UK is highly competitive and almost saturated but remains one of Europe’s top three mobile markets.
In a statement, France Telecom said: ‘In relation to media speculation, France Telecom clarifies that no offer from a third party to acquire the business in the UK has been received nor has one been invited. EE is a strong business with a clear leadership position in the UK market and its shareholders are 100% supportive of the group, its management and its strategy.’ EE itself said: ‘We would not comment on any possible future shareholder structure of our business.’