By Pamela Barbaglia
LONDON (Reuters) - Private equity funds KKR and Apax are looking to revive plans to snap up EE if Britain's largest mobile operator misses out on a deal with BT Group, sources familiar with the situation said.
KKR is sounding out private equity appetite to form a consortium for EE, buoyed by M&A ferment in the UK telecom market where the number one and two mobile operators, EE and O2, are holding sale talks with BT, one of the sources said.
Apax is likely to partner with KKR as the two private equity funds explored a joint bid for EE last year, the sources said.
Other investors such as CVC Capital Partners, which was also in talks to buy EE in 2013, no longer wants to enter the race for the mobile firm, one of the sources said.
"Any fresh offer hinges on BT's choice between O2 and EE," one of the sources said. "EE is the only attractive target for private equity bidders."
EE's owners Deutsche Telekom and Orange confirmed on Wednesday they were in talks to sell the business to BT.
Orange CEO Stephane Richard acknowledged this month that the 50-50 joint ownership of EE was not a "long-term arrangement" and the operator needed to adjust to the advent of fixed-mobile bundles in Britain.
Representatives at KKR, Apax and EE declined to comment. Spokesmen at Orange, Deutsche Telekom and CVC could not be reached for comment.
BT is expected to launch an offer for EE or Telefonica's O2 before Christmas, which could trigger an immediate reaction by private equity funds, the sources said.
"Sponsors need to be ready to take action if there is a concrete chance on EE," a sector banker said.
Hutchison Whampoa, the owner of Britain's fourth largest mobile operator 3 Group, is also preparing a bid for EE or O2, several sources familiar with the matter told Reuters.
Analysts value EE at 11 billion pounds ($17 billion), and 02 at 9.4 billion pounds.
Apax, which has recently placed a joint bid with Bain Capital to buy Oi's Portugal Telecom, has strong appetite for telecom assets, one of the sources said, noting that no offer has yet been made to EE.
EE, formerly known as Everything Everywhere, has 24.5 million subscribers in Britain. It launched its 4G mobile network in 2012 and 4G services are seen as an attractive platform for private equity investors.
(Additional reporting by Freya Berry; editing by David Clarke)