The communications provider will – if the talks prove successful – purchase EE's full UK business and further extend the range of services it offers by taking it into the mobile market.
BT says this proposed deal will enable it to "accelerate its existing mobility strategy" and "combine the power of fibre broadband, wi-fi and 4G".
The period of exclusivity for the negotiations is due to last for "several weeks" in order to let BT carry out due diligence and finalise negotiations on a "definitive agreement" – with the deal set to cost £12.5bn.
In addition, Deutsche Telekom will take on a 12 per cent stake in BT and have the chance to name one board member. Orange will take on a 4 per cent stake in BT.
BT says it will look to "generate revenue synergies" through the sale of its fixed-line services to the current EE customers who don't currently use any services from BT.