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01 March 2013
Sky to acquire Telefónica UK’s broadband and fixed-line telephony business

British Sky Broadcasting Group plc (Sky) today announces that it has reached an agreement with Telefónica UK for the proposed acquisition of its O2 and BE consumer broadband and fixed-line telephony business. The transaction will make Sky the second-largest provider in the UK broadband market, building on its existing position as the UK’s fastest-growing broadband and telephony business.

Telefónica UK’s consumer broadband and fixed-line telephony customers, of which there are currently over half a million, will become Sky customers for those services on completion. By creating the UK’s second-largest home broadband provider, the acquisition will deliver further advantages of scale for Sky’s home communications business.

Under the terms of the agreement, Sky will pay a consideration of £180 million to Telefónica UK for the consumer broadband, home phone and line rental customers served by the O2 and BE brands. An extra contingent amount, not exceeding £20 million, may be payable dependent upon the successful delivery and completion of the customer migration process by Telefónica UK.  Post completion, O2 and BE customers will be migrated onto Sky’s fully unbundled network, supported by a nationwide all-fibre core, which reaches 84% of all UK homes.

Following sustained growth in demand for broadband and home telephony since it entered the home communications market six years ago, Sky has built a business with 4.2 million broadband customers and 4 million telephony customers (as at 31 December 2012). In that time, Sky has established itself as the UK’s most popular triple-play provider with 3.6 million triple-play customers, one third of its base. This transaction will help Sky meet the growing demand from customers to take multiple products.

Jeremy Darroch, Sky’s Chief Executive, said: “Sky has been the UK’s fastest-growing broadband and telephony provider since we entered the market six years ago. From a standing start in 2006, we have added more than 4.2 million broadband customers. The acquisition of Telefónica UK’s consumer broadband and fixed-line telephony business will help us accelerate this growth.

“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. We look forward to welcoming these new customers to Sky and giving them access to our wide range of high-quality products, great value and industry-leading customer service.”
 
Ronan Dunne, Chief Executive of Telefónica UK, added: “Sky offers great value, totally unlimited broadband which includes unlimited fibre services. 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.”

This acquisition is the latest move by Sky to take advantage of the growth opportunity in home communications. Sky has added 382,000 customers (at 31 December 2012) for standalone home communications since the introduction of the service in 2010. In addition, Sky launched broadband and telephony products in the Republic of Ireland in February 2013 to further support organic growth.

The acquisition will be funded from existing cash reserves and is expected to be accretive to earnings per share in the second full year of ownership.

The acquisition is due to complete by the end of April 2013 and is subject to regulatory clearance.

-ENDS-

For more information:

Alice Macandrew, Sky
alice.macandrew@bskyb.com

Stephen Gaynor, Sky
stephen.gaynor@bskyb.com

Dave Massey, O2
dave.massey@O2.com

About Sky

Sky is the UK and Ireland’s leading home entertainment and communications company.  Around 40% of all homes have a direct relationship with Sky through its range of TV, broadband and home telephony services. 

Sky is the UK’s biggest investor in television content, investing more than £2.3 billion a year in channels such as Sky 1, Sky Atlantic, Sky Living, Sky Arts, Sky Sports, Sky Movies and Sky News.   Around two-thirds of Sky’s content spend is invested in the UK and Sky is the fastest-growing source of investment in original British programmes.  More than 30 million people watch Sky content each week.

Alongside its commitment to offering customers a greater choice of high-quality content, Sky is a leading innovator.  Customers enjoy total control and flexibility over their favourite TV through Sky+, watch TV on the move through Sky Go, and enjoy the best quality TV experience at home through High Definition and 3D.  

Sky distributes its content broadly over several platforms, including satellite, cable, IPTV, mobile and WiFi.  NOW TV, Sky’s second consumer brand, builds on the company’s leadership in internet TV.  Sky is also the UK's fastest-growing home communications company and favourite ‘triple-play’ provider of TV, broadband and home phone. 

Sky believes in making a wider contribution to the communities in which it operates by taking positive action on the environment, supporting grassroots sports and increasing access to, and participation in, the arts.  Sky employs 23,000 people, has annual revenues of £6.8 billion and is estimated to support a £5.4 billion contribution to UK GDP.  Sky is listed on the London Stock Exchange (BSY).  www.sky.com/corporate 

About O2

O2 is the commercial brand of Telefónica UK Limited and is a leading communications company with over 23 million customers – read more about O2 at www.o2.co.uk/news. O2 runs 2G and 3G networks and was the first to trial 4G/LTE, reaching speeds of over 100Mpbs, as well as owning half of Tesco Mobile. It also operates O2 Wifi, O2 Health, O2 Unify, O2 Media and has recently launched the O2 Wallet.

O2 employs over 11,000 people in the UK, has 450 retail stores and sponsors The O2, O2 Academy venues and the England rugby team. Telefónica UK Limited is part of Telefónica Europe plc which uses O2 as its commercial brand in the UK, Ireland, Slovakia, Germany and the Czech Republic and is a business division of Telefónica SA.

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