As you look around Europe, Orange or T-Mobile have been successful in most smaller markets with the exception of Italy, Spain and the UK.
The UK and Italy, and to a lesser degree, Spain are considered large markets in Europe. Add France and Germany (the home markets of Orange and T-Mobile) and you've go the largest markets in the EU.
The comparison with Sky is laughable: it's not about the number of households watching stuff they can get on DVB-T anyway but the number of them who sign up for added-value channels, which is Sky's main business.
Using BT wholesale service is an easy (and cheap) way to offer service consolidation. Fifteen years ago Deutsche Telekom and France Télécom were cooperating significantly then came the UMTS auctions. EE is simply the result of one not being prepared to buy out the other. Given that in other European markets the number of providers has been allowed to drop to 3 (merger of E-Plus and O2 in Germany is going ahead), there's no reason why that wouldn't happen in the UK, though there would then have to be some reallocation of spectrum. Presumably nobody's made the right kind of offer yet. Orange UK was large enough to be profitable so I EE probably is as well, meaning there is no urgency to sell.
Orange's DSL boxes are also woeful.