BT Starts Selling Mobile Plans in U.K. Ahead of EE Deal

BT Group Plc started selling wireless plans at a discount to its U.K. Internet consumers using EE Ltd.’s network, putting pressure on competitors as the biggest broadband and largest mobile company team up.

With monthly packages starting at 5 pounds ($7.50) for existing broadband customers and 10 pounds for new clients, BT’s push back into mobile has spurred rivals including Vodafone Group Plc, Sky Plc and TalkTalk Telecom Group Plc to offer their own bundles of phone, TV and Internet service.

BT is buying EE from Deutsche Telekom AG and Orange SA. The 12.5 billion-pound ($18.6 billion) deal will create the biggest phone company in Britain offering landline, wireless, broadband and TV service and the company expects it to be completed next year. The mobile plan announcement comes a day after rival O2 agreed to be acquired by Hutchison Whampoa Ltd. in the latest round of operator consolidation in Britain.

“It is a first step on a strategic path that will become much more assured upon the completion of its proposed purchase of EE,” said Steven Hartley, an analyst at Ovum research. “The U.K. is moving to a quad-play market and rivals will need to respond.”

Transformation Plan

Meanwhile, BT, which sold its mobile network 14 years ago, will resell EE’s service through a wholesale agreement. The company already offers mobile plans to corporate customers. The deal is part of a transformation that the company started in 2013 when it started offering free access to exclusive sports broadcasts to broadband customers and outbid Sky, its pay-TV rival, for some of the most popular rights, including the U.K.’s Premier League soccer games.

BT’s 5-pound plan for broadband customers offers 500 megabytes of data, enough to browse the Internet for about six hours, along with unlimited text messages and 200 minutes of talk time, the company said. It’s also offering 2- and 20-gigabyte plans for 12 pounds and 20 pounds respectively. The contracts don’t come with a phone, and BT is offering phones starting at 99 pounds.

Word that the former phone monopoly was interested in buying a mobile operator last year resulted in competitors preparing their own offerings. Vodafone will also start selling home phone, Internet and TV services later this year, and Sky Plc reached a deal with O2 to add mobile to its pay-TV and broadband packages. Others are bulking up.

Hutchison Agreement

On Tuesday, billionaire Li Ka-shing’s Hutchison agreed to acquire O2 for more than $15 billion from Telefonica SA. The deal paves the way for Hutchison to merge its Three business with O2 -- the carriers together have more than 30 million subscribers -- in a move that would reduce the number of U.K. wireless networks to three from four. The country has more mobile subscriptions than people.

U.K. regulator Ofcom started a strategic review of the industry this month to examine competition and investment issues, the first such probe in a decade. BT’s rivals are using it as a chance to call for the examination of the company’s market control.

‘Network May Suffer’

BT owns much of the Internet and fixed-line phone infrastructure in the U.K., and resells the service through Openreach, a separately managed business that provides network access to competitors.

Openreach’s service is already poor and owning a mobile operator will be a distraction, Matthew Braovac, Vodafone’s U.K. head of regulatory affairs, said in London.

“At the moment, the BT board are focused on sports rights and retail and all sorts of other things and with the acquisition of EE, that management focus is, not surprisingly, shifting toward that area,” Braovac said. “It’s a concern that network investment and real focus on delivering the network may suffer.”

Sky and TalkTalk have also called for a split of Openreach. BT’s merger with EE “will extend BT’s dominance of the market,” TalkTalk said in a statement this month.

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