O2 broadband business sold to BSkyB

BSkyB is to acquire Telefnica UK's consumer broadband and fixed-line telephony business.

The broadcaster has agreed to cough up 180 million for Telefnica UK's consumer broadband and home phone user base, as well as a further 20 million once the firm's customers have been successfully moved over to the Sky network

The deal, which covers both Telefonica's O2 and BE consumer brands, is expected to be completed by the end of April.

The company reports to have more than eight million customers signed up to its telephone and internet services and claims the acquisition will make it the UK's second-largest home broadband provider.

In a statement, Jeremy Darroch, chief executive of Sky, said the deal will allow it to scale.

"The O2 and BE consumer broadband and telephony business is a great fit, with customers used to high-quality products and strong levels of customer service.

"We look forward to welcoming these new customers to Sky and giving them access to our wide range of high-quality products, great value and industry-leading customer service," he concluded. Ronan Dunne, chief executive of Telefnica UK, added: "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."

News of the deal comes hot on the heels of the announcement earlier this month that rival broadband provider, Virgin Media, was being sold to US cable company Liberty Global for $23.3 billion, reportedly making it the world's largest broadband provider.

Emeka Obiodu, telco strategy analyst at market watcher Ovum, said the deal could be a potential source of concern for Virgin Media's new owners.

"This strengthens the hand of BSkyB in the market as the company would now be able to boast of having a bigger TV customer base, and more broadband customers than its main rival Virgin Media," said Obiodu.

"[This] will undoubtedly convert the UK's pay-TV and broadband markets into a three-way fight [between Virgin Media, BSkyB and BT]. It doesn't have to be bad for consumers, but some may not like it."