Sky is set to become Britain’s second largest broadband provider following a deal announced today. The company said it has reached an agreement to buy the O2 and BE broadband and fixed line businesses. There are currently about half a million customers using Telefónica UK’s consumer broadband and fixed-line telephony services.
Commenting on the deal Sky’s Chief Executive, Jeremy Darroch, said “Sky has been the UK’s fastest-growing broadband and telephony provider since we entered the market six years ago. From a standing start in 2006, we have added more than 4.2 million broadband customers. The acquisition of Telefónica UK’s consumer broadband and fixed-line telephony business will help us accelerate this growth.” He went on to say that existing O2 and BE customers “used to high-quality products and strong levels of customer service” are a great fit for Sky’s services.
The Chief Executive of Telefónica UK, Ronan Dunne, made a statement saying that “Sky offers great value, totally unlimited broadband which includes unlimited fibre services,” and that he believes “this agreement is the best way of helping our customers get the highest quality home broadband experience from a leading organisation in the market.” The deal means that Telefonica UK can focus upon delivering great mobile connectivity including 4G services, added Dunne.
To seal the deal Sky will pay £180 million to Telefonica. A further amount, up to, but not more than £20 million, will be paid upon successful delivery and migration of the services to Sky. Furthermore “Post completion, O2 and BE customers will be migrated onto Sky’s fully unbundled network, supported by a nationwide all-fibre core, which reaches 84% of all UK homes.”
The deal is due to complete in April. Following the deal BT will still be the number one provider of broadband and fixed lines but Sky will leapfrog both arch-rival Virgin Media and TalkTalk.
Does a company like Telefonica really have to put aside its broadband and fixed line business to concentrate on 4G service provision? Perhaps its planners and analysts see such services becoming less and less relevant as we approach the dawn of the 4G and White Space wireless eras and that now is the best time to sell up.
