Sky to buy O2’s broadband business for up to £200m

Satellite broadcaster Sky is set to become the UK’s second-largest broadband provider after agreeing to buy O2’s fixed-line telephony business for up to £200 million.

Sky will pay O2 parent company Telefónica UK an initial £180m for the operation, which has more than 500,000 customers. Depending on the successful migration of customers to Sky, the Spanish-owned group may get an extra payment of £20m.

The deal, which is subject to regulatory approval, will swell Sky’s broadband customer base to about 4.7 million, allowing it to leapfrog Virgin Media, which had almost 4.3 million subscribers at the end of 2012. Market leader BT has around 6.5 million broadband customers.

Sky chief executive Jeremy Darroch said: “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.”

Telefónica said it wanted to focus on its mobile phone business, having spent £555m on a 4G licence last month.