Sky to enter Britain's mobile market with Telefonica deal (updated)

Hang Lung

29/01/2015 12:09

(Adds quotes, background) 
    By Kate Holton 
    LONDON, Jan 29 (Reuters) - Britain's dominant pay-TV group 
Sky  SKY.L  plans to launch a mobile service from 2016 through a 
deal with O2 owner Telefonica  TEF.MC , ramping up the pressure 
in the country's already crowded communications market.  
    Sky, which raced to become the country's second-largest 
provider of home broadband after entering the market just seven 
years ago, will offer voice and data services to all customers 
through a wholesale partnership with Telefonica's O2 network. 
    Britain's communications market has seen a wave of deals in 
recent months and Telefonica has just agreed to sell its O2 UK 
business to Hutchison Whampoa  0013.HK , which plan to combine 
it with its Three Mobile network to create the country's largest 
mobile network. 
    The country's biggest fixed-line provider BT  BT.L  is also 
in exclusive negotiations to buy the biggest mobile provider EE 
as companies increasingly seek to offer a package of services 
including fixed and mobile calls, broadband and entertainment. 
    The new tie up could be bad news for Vodafone  VOD.L , which 
had been seen as a leading contender for the wholesale 
partnership with Sky as the two firms already have content 
partnerships in place.  
    "As the UK's leading brand for home entertainment and 
communications, Sky has a proven ability to launch new services, 
at scale," Chief Executive Jeremy Darroch said.  
    Telefonica UK is already the network provider to a number of 
other brands, such as Tesco Mobile, and a willingness to open 
its network to Sky could help it gain regulatory approval for 
the Three-O2 deal. 
    Sky, 39 percent-owned by Rupert Murdoch's 21st Century Fox 
 FOXA.O , is present in more than 10 million homes and has in 
recent years succeeded in selling an increasing number of 
services to its customer base. 
    It already offers Sky Go, which enables its customers to 
watch Sky programming across a number of devices.      
    The addition of a company well equipped to cross-sell 
services could further intensify pressures in the UK mobile 
market which is already one of Europe's more competitive with 
operators' margins in the low-to-mid 20 percent range.  
    The deal also shows how the "convergence" trend -- where 
customers buy bundles of Internet, fixed and mobile calling, and 
TV from one company -- is taking root in Britain despite claims 
from some executives that there was little demand. 
    Such all-included bundles are already popular in France and 
Spain, although not as much in Italy or Germany. 
 
 (Reporting by Kate Holton; Editing by Neil Maidment and Mark 
Potter) 
 ((kate.holton@thomsonreuters.com; 0044 207 542 8560; Reuters 
Messaging: kate.holton.thomsonreuters.com@reuters.net)) 
 
Keywords: SKY TELEFONICA/PARTNERSHIP