BSkyB to buy O2's UK broadband business for £200m

BSkyB is buying the broadband arm of O2's parent company Telefonica UK for £200 million. The deal will make BSkyB the second biggest UK broadband company, helping it hop ahead of Virgin Media.

The number of people getting their Internet fix from Sky will jump from 4.2 million to 4.7 million. Virgin Media currently has 4.5 million broadband customers, while BT remains first in the UK with 6.6 million.

Sky will pay £180 million, with another £20 million depending on the successful completion of transfer of customers between the two businesses. Not only will it gobble up O2's broadband business, but also Telefonica's BE brand. Providing it gets clearance from the regulatory bodies, the deal should be complete by the end of April.

Telefonica has wanted out of the UK broadband market for a while now in order to focus on its 4G rollout. Like Virgin and Three, O2 won a chunk of 4G spectrum in the recent auction held by Ofcom, and is expected to launch its super-fast service in the spring. Telefonica currently has around 23.5 million mobile customers in the UK.

Sky launched its broadband offering in 2006, and now has 3.6 million "triple-play" customers (i.e. those who come to it for all their TV, broadband and landline needs).

BSkyB's chief executive Jeremy Darroch said it was the fastest-growing provider, and that acquiring Telefonica's UK broadband business would help Sky "accelerate this growth."

He added: "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."

Telefonica UK chief executive Ronan Dunne said: "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 from a leading organisation in the market."

Rupert Murdoch's arch rival Jone Malone is buying Virgin Media, so BSkyB's move could be an attempt to smack down Malone and his company, Liberty Global. Following the announcement of the Liberty Global deal, Virgin Media's chief executive said it would help his company "grow faster and deliver enhanced returns," so I think we've got a fight on our hands in the UK broadband market.

Do you get your broadband from Telefonica UK? Will you be happy about becoming a Sky customer? Let me know what you make of it in the comments, or on Facebook.