BT has announced it has entered into exclusive talks with Deutsche Telekom and Orange over the acquisition of EE. 

The £12.5 billion (€15.7 billion) cash and shares deal under discussion would see Deutsche Telekom hold a 12 percent stake in BT and Orange hold a four percent stake in the UK operator.

DT would be entitled to appoint one member of the BT Board of Directors as part of the deal.

BT said it has “a range of options” regarding the cash part of the deal, adding it is “mindful of the importance of maintaining a conservative financial profile”.

The operator said it expects “significant synergies”, mainly through network and IT rationalisation, back-office consolidation and savings on procurement, marketing and sales costs.

The exclusive talks will last “several weeks”.

BT would look to sell its fixed services to EE’s 24.5 million mobile subscribers. The addition of EE’s mobile subscribers would make it the largest quad-play provider in the UK market by some distance.

The three companies confirmed they were in preliminary talks last month.

Orange CEO Stéphane Richard tweeted: “#BT-EE: 2nd strategic move for Orange in EU in a few weeks. We are transforming & we are strengthened!”

Deutsche Telekom CFO and Chairman of EE’s Board Thomas Dannenfeldt commented: "We firmly believe that convergence is the future of telecommunications in Europe.

"Customers want fixed-mobile converged services from a single provider. The proposed transaction with BT offers the chance to further develop our superbly positioned mobile business engagement in the UK and to take part in the outstanding opportunities of an integrated business model."

The news means Telefónica is set to miss out. The Spain-based operator is also keen to sell its O2 business to BT and analysts had thought a deal with Telefónica would be simpler.

The company announced it was having discussions with BT two days before EE’s owners confirmed their talks.

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