O2 refines focus on mobile internet with BSkyB broadband sale

The O2 will be entirely focused on mobile internet services after announcing this morning (1 March) it is to sell its fixed line broadband and phone business to BSkyB.

O2 Broadband Sky

Sky will pay up to £200m for the O2 and BE fixed line telephony business, which has more than 560,000 customers. It will make it the second largest broadband provider in the UK behind BT.

O2 says its marketing and commercial staff who were previously tasked with working on its fixed line services will be integrated to the wider business if the deal, which is subject to regulatory clearance, goes ahead.

An O2 spokesman says the acquisition will give the company the chance to focus on delivering “best in class digital services”.

The £200m cash injection – which works at at about £350 a head per customer – will also go some way to helping make up for the £550m O2’s owner company Telefonica UK is set to outlay for its slice of the UK’s 4G spectrum.

O2 saw its mobile revenue decline 8.5 per cent year on year in the final quarter of 2012, despite signing up 282,000 contract customers – more than EE’s 201,000 additions and Vodafone’s 230,000 picked up in the final quarter.

Emeka Obiodu, telco strategy analyst at Ovum, says the acquisition marks a “dangerous scenario” as it may reduce the strategic maneuvererability of the UK’s mobile telcos in a “converged future”.

Obiodu adds: “At a time when telcos across Europe are intensifying efforts to offer converged – mobile, fixed, broadband, TV – services, mobile telcos in the UK are making themselves much more reliant on mobile. EE still retains a presence in the fixed telecoms space but its offering is increasingly infrastructure-light.”

For Sky, the acquisition of O2 and BE’s copper ADSL lines will give it more opportunities to encourage its customers to take up its “triple-play” broadband, TV and home phone packages. Sky currently has 3.6 million triple-play customers, according to its latest quarterly financial report.

Sky’s closest rival Virgin Media was sold to US cable company Liberty Global in a deal worth $23.bn (£14.8bn) last month, making the merged entity the “biggest broadband provider in the world”.

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