Sky to become second largest provider of UK broadband

British Sky Broadcasting Group has agreed to purchase Telefnica UK's broadbank and fixed-line telephony business, making Sky the second-largest provider in the UK broadband market.

Sky will pay Telefnica a consideration of £180m for the consumer broadband, home phone and line rental customers served by the O2 and BE brands. An extra contingent amount of up to £20m, may be payable dependent upon the successful delivery and completion of the customer migration process by Telefnica 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.

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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 4.2m broadband customers. The acquisition of Telefnica 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."

The acquisition, which is due to be completed by the end of April, will be funded from existing cash reserves and is expected to be accretive to earnings per share in the second full year of ownership.

NR