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Sky to launch own mobile network and take fight to BT

Hot on the heels of news that rival BT is planning to buy EE, Sky says it's going to add mobile phone service to its roster.

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Sky

Sky is wading into the mobile market, confirming plans to kick-start its own network in 2016.

The news comes at a time of great upheaval for the UK's mobile and TV market, with BT announcing its intention to buy EE -- a deal that would see BT laying claim to a massive mobile network, as well as TV, phone and broadband services. Meanwhile Three owner Hutchison Whampoa has revealed plans to buy O2 for £10.25 billion.

"Through our partnership with Telefonica UK," Sky's Group Chief Executive Jeremy Darroch said, "we can build on our expertise in content, innovation and service to launch a range of exciting new services and exploit the opportunities for growth in the fast-changing mobile sector."

The broadcaster plans to start offering customers a range of mobile voice and data services. When its network launches, Sky will be relying on hardware from Telefonica, which is a Spanish company that -- for now at least -- still owns O2. Telefonica will offer Sky access to its 2G, 3G and 4G services.

Bundles are key

Increasingly it seems that service providers in the UK are looking for bundled offerings, with shoppers tying themselves into deals that see their broadband, TV and mobile services all offered by the same company.

"Sky was forced down this route," said Paolo Pescatore, industry observer at CCS Insight. "It can't afford to be left behind in the multi-play market. This deal with O2 underlines the importance of offering a multi-play package.

"With BT's plans to launch a consumer mobile offering and the acquisition of EE," Pescatore said, "As well as Vodafone's plans to offer broadband and TV, Sky had no choice but to launch its own mobile offer. For now, Sky is the undisputed leader in triple play services.

"Without mobile, it was vulnerable in the future. However, it is surprising that the first Sky mobile service will not be offered sooner than 2016."

The strategy of offering landline, TV, broadband and mobile together has been dubbed "quad-play", and is becoming a major trend, but one analyst warns of the potential for shopper confusion.

"This is further proof of the UK's inevitable shift towards 'quad-play' services," Dominic Baliszewski, telecoms analyst at Broadbandchoices said. "But it remains to be seen how quickly customers will adopt these new bundles -- at the moment, just understanding the new mobile world order is going to be confusing enough for customers with Sky teaming up with Telefonica, Telefonica selling O2 to Three and BT buying EE outright."

Vodafone "misses out"

One UK network that currently lacks any allies in the new mobile power-shift is Vodafone. "For Vodafone, the deal intensifies competition as it will come up against another quad-play provider," Kester Mann, analyst at CCS Insight told CNET. "It still has a relationship with Sky (Sky Sports on 4G, Now TV), but this is another MVNO deal it has missed out on."

Pescatore believes Vodafone could still ally with Sky, saying, "We still believe that Sky is a takeover target for Vodafone, given the mobile operator's need to have a strong broadband and pay TV offering."