Sky Nets ISP For Triple Play Services
Satellite giant BSkyB has announced an agreement to purchase internet service provider EasyNet in a deal worth £211 million, giving the company a slice of the UK’s rapidly growing broadband market.
The deal will see BSkyB pay 175p per share in cash for each share in EasyNet, a price roughly 38% up on their value at market close yesterday.
Sky’s acquisition will enable it to offer triple-play services to customers, comprising TV, phone and internet services which more readily compete with those from cable providers, such as the soon to be merged ntl and Telewest.
Commenting on the deal, BSkyB’s chief executive, James Murdoch, said: “Today’s offer reflects the exciting opportunities that now exist to combine quality entertainment with significant high-speed connections.”
It has been widely rumoured that BSkyB will use its new internet operation to run a video on-demand (VOD) service over broadband lines, although the company has refused to confirm any plans in the area.
In a conference call with journalists this morning, however, Murdoch hinted that a VOD service could be in the works, stating: “We expect a rapid convergence between Pay TV and broadband. We enter a segment of the market with no incumbencies … the [EasyNet acquisition] will enable us to enter a new range of services to customers.”
The acquisition will enable the Sky service to compete with both new and established players in the digital TV market, including BT who are due to launch their own on-demand service with a specialised Freeview set-top box later this year (see BT Plans To Revolutionise TV With Personal Channels).
In addition to VOD services, the broadband market is one of the UK’s fastest growing industries, with a yearly increase of around 86% in 2005 from 4.4 million connections to 8.1 million at 30 June, with further growth predicted.
In addition, Sky revealed that nearly half of its satellite TV customers have broadband connections to their home, with most planning to review their service provider over the next few years.
EasyNet’s network is “unbundled” from BT’s local exchanges, enabling much faster connections, although the company currently reaches just 18% of UK homes and 750,000 businesses.
However, BSkyB is understood to have earmarked around £100-200 million for the development of a high speed broadband infrastructure, extending EasyNet’s reach to compete with other service providers, and cable firms which will soon reach over 50% of Britain’s homes (see BSkyB Expected To Take-Over Easynet Group).
EasyNet’s latest financial results reported a turnover of £144.1 million, with a loss on “ordinary activities before taxation” of £19.5 million for the year to December 31 2004.
BskyB: 0207 705 3000 www.sky.com