BSkyB today made a significant move to grow further beyond pay-TV, paying up to £200 million for mobile giant O2’s broadband and fixed-line operation.
The move means Sky leap-frogs rival Virgin Media to become the UK’s second biggest broadband provider by customer numbers and also closes the gap with market-leader BT.
Sky is best known for pay-TV with over 10 million subscribers but has quietly built up a substantial broadband business since 2006, with 4.2 million customers.
Buying O2’s broadband business will add a further 500,000 customers, taking Sky’s total to 4.7 million against Virgin, with around 4.5 million, and BT on 6.6 million.
Sky, 39% owned by Rupert Murdoch’s News Corporation, will have been especially keen to boost the company’s broadband operation after US cable giant Liberty Global’s $23.3 billion (£15.3 billion) swoop for Virgin Media last month. John Malone, a long-time rival of Murdoch, runs Liberty.
Sky’s broadband acquisition will also raise the pressure on telecoms giant BT, which has been trying to undermine Sky by expanding into pay-TV and buying up sports rights in recent months.
Jeremy Darroch, Sky’s chief executive, has made a big push into broadband and home phone as a way to keep revenues rising in recent years.
Selling pay-TV, broadband and home phone together is known as a “triple play” and makes each customer much more profitable. Sky, Virgin and BT have all adopted similar tactics.
Around one-third of Sky’s subscriber base takes a “triple play” at present and Darroch has said there is a big opportunity to persuade customers to take more services.
Sky is paying £180 million upfront to 02 and a further £20 million so long as customers successfully transfer over.
