Counter to expectations, BT has entered into exclusive talks with Deutsche Telekom and Orange regarding the possible acquisition of EE, the UK’s leading mobile operator. It was thought the UK fixed incumbent was closer to a deal with O2.

According to a statement, the key headline terms, which are non-binding, include a purchase price of £12.5 billion for EE on a debt and cash free basis.

The consideration for EE will be payable as a combination of cash and new BT ordinary shares issued to both Deutsche Telekom and Orange.

Following the transaction, Deutsche Telekom would hold a 12 per cent stake in BT and would be entitled to appoint one member of the BT Board of Directors.

Orange would hold a 4 per cent stake in BT. In considering the financing of the cash element, BT has a range of options and “is mindful of the importance of maintaining a conservative financial profile”.

Analysts have described BT’s acquisition efforts as having the potential to create one of the UK market’s biggest shakeups in recent years. CCS Insight’s Kester Mann was surprised by BT’s move for EE at the expense of O2: “O2 was thought to be favourite, but EE is a more desirable asset and removes a multi-play rival from market,” he tweeted.

Mann added that regulatory factors will play a major role in approval of the deal. “It’s unlikely to be blocked, but expect significant concessions,” he warned.

BT’s official statement on the matter suggested the deal will not move quickly. “The period of exclusivity will last several weeks allowing BT to complete its due diligence and for negotiations on a definitive agreement to be concluded,” it noted.