Telefónica UK is selling its broadband business and fixed-line business to British Sky Broadcasting (BSkyB) in a deal valued at £180 million.
Telefónica UK's CEO Ronan Dunne told the Financial Times: "As we focus on delivering best-in-class mobile connectivity, including next generation LTE 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."
BSkyB, which is about 40 per cent owned by Rupert Murdoch's News Corp, is eager to grow its telecoms business ahead of a possible expansion into the UK by the cable giant Liberty Global. This US-based cableco agreed to purchase the UK cable-TV provider Virgin Media for about $16 billion last month, according to Bloomberg.
BSkyB said the deal with Telefónica UK, which should be completed next month, is its latest move to take advantage of the growth opportunity in home communications. A clause to the transaction calls for another £20 million to be paid depending on the successful delivery and completion of the customer migration process by Telefónica UK, according to the FT.
Commenting on the deal, Ovum telecom analyst Emeka Obiodu said: "This is significant for Telefónica UK as it now puts its hopes for a broadband future on LTE, combined with Wi-Fi. In the recent auction it won spectrum in the 800 MHz band, which will be good for providing coverage, albeit with limited capacity. But it is interesting that it didn't get spectrum in the 2.6 GHz band, which would have been good for high capacity broadband over shorter distances. Whether this was a strategic choice or a result of being outbid remains to be seen, as Ofcom is yet to publish the bid history. However, it means that for its broadband services O2 will have to rely on 800MHz spectrum and its existing spectrum holdings (unless a rival is willing to trade spectrum) combined with the Wi-Fi push it instigated in 2011. Its own fixed line home broadband service is no longer an option."
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