Telefónica UK sells broadband and fixed-line business to Sky

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The company, which operates under the brand name O2 in the UK, has sold its broadband and fixed-line business to Sky so it can focus on its mobile offering

Telefónica UK (O2) has sold its broadband and fixed-line business to Sky for around £200 million.

The acquisition will make Sky the second-largest provider in the UK broadband market, with Telefónica UK’s broadband and fixed-line telephony customers, of which there are currently over half a million, becoming Sky customers for those services on completion of the deal at the end of April.

Sky will pay £180 million to Telefónica UK for the consumer broadband, home phone and line rental customers served by the O2 and BE brands, and a further £20 million once customers have been successfully migrated.

Telefónica UK chief executive Ronan Dunne said the sale will help the O2 brand focus on its mobile offering, in particular developing 4G 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,” he said.

Sky 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.”

Ovum telco strategy analyst Emeka Obiodu said the announcement is significant for O2 as it not “puts hopes for a future broadband future on LTE [4G], combined with wi-fi”.

Obiodu said the sale reduces the power of UK mobile operators in the converged (fixed, mobile, broadband, IT) space, making them more reliant on mobile.

“EE still retains a presence in the fixed telecoms space but its offering is increasingly infrastructure-light. Ultimately, this is a dangerous scenario as it might reduce the strategic manoeuvrability of the UK’s mobile telcos in a converged future,” she said.

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