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BSkyB to Acquire Telefonica's U.K. Broadband Unit for up to $300 Million

BSkyB CEO Jeremy Darroch Headshot - P 2012
Courtesy of BSkyB

UPDATED: The deal will make the pay TV giant, in which Rupert Murdoch's News Corp. owns a 39 percent stake, the second-largest U.K. broadband provider.

British pay TV giant BSkyB has reached an agreement to acquire Spanish telecom giant Telefonica's U.K. broadband and telephony business for up to $300 million (£200 million).

The deal for the operation, which has over half a million subscribers and uses the O2 and BE brands, will make BSkyB the second-largest U.K. broadband provider. It has already been Britain's fastest-growing broadband and telephony business with 4.2 million broadband subscribers and 4 million telephony customers as of year-end 2012.

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"The acquisition will deliver further advantages of scale for Sky's home communications business," the company, in which Rupert Murdoch's News Corp. owns a 39 percent stake, said Friday in announcing the deal.

BSkyB said it will pay Telefonica $273 million (£180 million) under the deal terms. An additional amount, not exceeding roughly $30 million (£20 million) may be payable dependent on a successful customer migration process.

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"The acquisition of Telefonica U.K.'s consumer broadband and fixed-line telephony business will help us accelerate this growth," said BSkyB CEO Jeremy Darroch. "We believe that 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."

U.K. cable operator Virgin Media, which is being acquired by John Malone’s Liberty Global, ended 2012 with 4.5 million broadband subscribers. Telecom giant BT is the country's largest provider with close to 6.5 million broadband customers.
 
The acquisition is the latest move by BSkyB as it looks to take advantage of growth in home communications. The company has signed up 382,000 customers for stand-alone home communications services since it made the business a focus area in addition to its traditional pay TV operation in 2010. Most recently, it launched broadband and telephony services in Ireland last month. 

The Telefonica acquisition is expected to be completed by the end of April and is subject to regulatory clearance.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai