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Sky becomes UK’s second-largest broadband provider

Sky became the UK’s second-largest broadband provider after agreeing a deal to buy rival O2’s half a million customer accounts.

The deal will close the gap on market leader BT, as well as place Sky ahead of Virgin Media and TalkTalk

The satellite broadcaster, which has built a business with 4.2 million broadband customers since 2006, will pay O2 owner Telefonica £180 million (€207.9 million) for the O2 and BE consumer broadband and home phone businesses.

The deal is due to complete in April and will close the gap on market leader BT, as well as place Sky ahead of Virgin Media and TalkTalk.

Around 3.6 million Sky customers take its ‘triple-play’ range of TV, broadband and home telephony services and Sky said the acquisition will provide advantages of scale for its home communications business.

BSkyB chief executive Jeremy Darroch said: “From a standing start in 2006, we have added more than 4.2 million broadband customers. The acquisition of Telefonica’s UK consumer broadband and fixed-line telephony business will help us accelerate this growth.”

Sky said O2 and BE’s broadband customers will be switched to its all-fibre network and that it might also pay up to £20 million (€23 million) to Telefonica UK for the successful completion of the migration process. Mobile phone business O2, which has more than 23 million customers in the UK, said the deal would enable it to focus on the roll-out of next generation 4G services.

BT, which showed initial interest in the O2 assets before pulling out of the bid process, said the deal highlighted the need for regulators to keep pace with the rapid convergence of the broadband and pay TV markets.

It said: “The current imbalance, whereby Sky has cheap access to our assets while protecting its own, is not only keeping UK pay TV prices artificially high, it is also enabling Sky to sweep aside smaller ISPs who cannot compete as a result.”

Meanwhile, the largest trade union in O2 said it had received assurances from the company that there will be no redundancies as a result of the sale.

The CWU union said the 550 affected staff, the majority of whom are based in O2’s centres at Leeds, Glasgow and Preston Brook, Cheshire, will continue to work for Telefonica O2, initially retaining their existing roles and responsibilities before being redeployed into other parts of the business.

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