BSkyB Buys Telefonica U.K. Broadband Unit for $303 Million

British Sky Broadcasting Group Plc (BSY), the U.K.’s biggest pay-television company, agreed to buy Telefonica SA (TEF)’s broadband and fixed-line phone division in the country for as much as 200 million pounds ($303 million).

The deal will make BSkyB the second-biggest provider of broadband Internet connections in the U.K., according to a statement today from the Isleworth, England-based company. BSkyB will pay 180 million pounds and potentially a further 20 million pounds, depending on successful customer migration.

BSkyB, which is about 40 percent owned by Rupert Murdoch’s News Corp. (NWSA), is seeking to extend its business ahead of a possible expansion into the U.K. by billionaire John Malone’s cable giant Liberty Global Inc. (LBTYA) Malone’s company agreed to buy U.K. cable-television provider Virgin Media Inc. (VMED) for about $16 billion last month.

“Sky has been the U.K.’s fastest-growing broadband and telephony provider since we entered the market six years ago,” Chief Executive Officer Jeremy Darroch said in the statement. “The acquisition of Telefonica U.K.’s consumer broadband and fixed-line telephony business will help us accelerate this growth.”

BSkyB rose 0.8 percent to 857 pence at 9:47 a.m. in London. Telefonica advanced 1.2 percent to 10.12 euros in Madrid.

Triple Play

Telefonica’s 560,000 U.K. broadband customers could represent an opportunity for BSkyB to sell its phone and TV products and may precede a larger expansion of Sky’s Internet assets, Thomas Singlehurst, a Citigroup Inc. analyst, said in a note to investors today. BSkyB has more than 4.2 million broadband customers.

Triple-play packages of T.V., Internet and phone services are “a key leg to the story at BSkyB and this will significantly increase its standalone communication base,” Singlehurst said.

Telefonica, Spain’s biggest phone carrier, is selling assets to reduce a debt pile that exceeds 50 billion euros ($65 billion). The company also owns the O2 mobile-phone operator in the U.K.

BT Group Plc is the U.K.’s biggest broadband provider. Virgin Media had 4.27 million broadband customers at the end of December.

To contact the reporter on this story: Ville Heiskanen in Helsinki at vheiskanen@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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