Sky buys O2 Broadband

BSkyB the media giant has agreed to acquire O2/Telefonica's O2 broadband service (this also includes the Be broadband service that O2 originally acquired to launch their broadband services). Sky will initially pay Telefonica £180m followed by another £20m following the successful migration of the customer base.

O2/Be have 560,100 broadband customers which added to Sky's 4,235,000 customers gives them 4,795,100 customers and pushes Sky into 2nd place in the UK broadband market following BT Retail with 6,569,000 and putting VirginMedia into 3rd place with 4,465,000.

The acquisition also covers O2's fixed line telephony unit and will increase Sky's consumer offering.

Though there is overlap in terms of infrastructure, O2's network will be migrated on to Sky's existing network - though it's likely there will be some exchanges that O2 have unbundled that Sky haven't - which means Sky's LLU (local loop unbundled) network will grow slightly as they move into those exchanges.

Sky will maintain O2's LLU offering (i.e. wholesale broadband service offered to other operators), but O2's LLU business will be migrated on to Sky's network. This should be a 'good thing' as O2's network reach will increase as they get access to Sky's unbundled exchanges, however some operators are worried that the quality of the underlying network will decrease and thus the customer experience may deteriorate.

The deal still has to get regulatory approval, but assuming there are no objections it should complete by April.

The added cash (which cant hurt as Telefonica/O2 has just spend a chunk on buying 800MHz spectrum in the recent 4G spectrum auctions) will be used to accelerate the rollout of 4G services.