BSkyB set to become UK’s second largest broadband provider after deal with Telefónica UK

BSkyB has today announced that it has reached an agreement with Telefónica UK for the proposed acquisition of its O2 and BE consumer broadband and fixed-line telephony business. The deal will see it overtake Virgin Media to become the second biggest broadband business behind BT.

The agreement, due to take place by the end of April 2013, will see BSkyB pay £180 million to acquire the broadband and phone line services, with an additional contingent sum of up to £20 million, dependent on the successful completion of the transfer of customers between the two businesses.

The news comes a few weeks after Virgin Media accepted a £15 billion takeover from Liberty Global, in which Virgin Media would become the world’s largest broadband communications company.

However, the announcement on Friday means that BSkyB will acquire an extra 500,000 UK subscribers on top of its already 4.2 million, bringing it ahead of Virgin Media to become the second largest UK broadband business behind BT, with 6.6 million subscribers.

Jeremy Darroch, Sky’s Chief Executive, 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.

“We believe that the O2 and BE consumer broadband and telephony business is a great fit, with customers used to high-quality products and strong levels of customer service. We look forward to welcoming these new customers to Sky and giving them access to our wide range of high-quality products, great value and industry-leading customer service.”

Ronan Dunne, Chief Executive of Telefónica UK, added: “Sky offers great value, totally unlimited broadband which includes unlimited fibre services. As we focus on delivering best-in-class mobile connectivity, including next generation (4G) services, we believe this agreement is the best way of helping our customers get the highest quality home broadband experience from a leading organisation in the market.”

Commenting on the news, Emeka Obiodu, telco strategy analyst at Ovum said: “The battle for pay-TV and broadband supremacy in the UK has now intensified strongly. BT, the largest broadband provider, has spent heavily to win TV rights, and earlier this week, took over ESPN’s UK and Ireland TV channels.

“Now BSkyB, the UK’s largest pay-TV provider, has moved swiftly to become the second largest broadband provider. Such a consolidation, in addition to Virgin Media, will undoubtedly convert the UK’s pay-TV and broadband markets into a three-way fight. It doesn’t have to be bad for consumers, but some may not like it.”