Sky hires advisers amid battle for dominance of UK telecoms
File photo dated 02/03/11 of a worker erecting a Sky TV poster in Birmingham as satellite broadcaster BSkyB insisted its sports offering had "never been in better shape" as it laid down the gauntlet to rival BT with a leap in earnings and subscriber numbers. PRESS ASSOCIATION Photo. Issue date: Thursday May 2, 2013. The group said operating profits increased 9% to £994 million in the nine months to March 31 and subscriber numbers passed 30 million for the first time. BSkyB is facing a rising threat from BT in the television market, ahead of this summer's launch of the rival company's sports channel, which has won the right to screen 38 Premier League games a season. See PA story CITY BSkyB. Photo credit should read: David Jones/PA Wire©PA
The battle for dominance of the British telecoms and media market has accelerated after Sky hired advisers to explore possible deals in the wake of the opening of talks between its arch-rival BT and mobile operators EE and O2.
Lazard, the investment bank, has been lined up to advise the British-based broadcasting group to evaluate options for taking part in the wider UK telecoms consolidation that is sweeping the sector.
The decision comes as global telecoms companies challenge traditional broadcasters by pursuing an ambitious new drive to bring together internet, mobile phone and television content.
Sky is working with Lazard to assess what recent events mean for the media sector, according to people familiar with the situation who say it has no current plans to buy EE or O2.
Possible deals include an acquisition, a commercial tie-up with a UK operator, or a bid to win more TV football rights at next year’s Premier League auction – taking advantage of BT’s new focus on mobile – one person said.
Sky and Lazard declined to comment. Other investment banks are also expected to take a role in the process, according to a person with knowledge of the talks.
Sky’s review will add further fuel to takeover speculation in the UK telecoms and media sectors, after BT disclosed its talks with O2 and EE last week that could make the UK telecoms group a dominant force in its home market.
Vodafone, the British mobile telecoms group, is also considering its response. People close to the company said options discussed in internal meetings have included a merger with US cable group Liberty Global – which has long been top of the UK company’s wish list – alongside the acquisition of other British rivals. No deal is being prepared or discussed with Liberty or any other group, according to those close to Vodafone.
Similarly, Hutchison Whampoa is looking at the position of its Three network in the UK, which has also been linked with a potential bid for one of its mobile rivals. It is also expected to hold talks with Telefónica and EE’s owners, Deutsche Telekom and Orange.
Sky is at risk of becoming the odd one out among British internet providers, as TalkTalk, Virgin Media and BT are all set to offer mobile phone contracts by early next year.
BT is already planning to attract customers from Sky with offers of bundled offers of TV, broadband and mobile, but would see its business considerably strengthened with the additional of more than 20m customers from either O2 or EE.
Jeremy Darroch, Sky’s chief executive, said last month it would be “logical” for the company to offer mobile, but questioned whether customer demand existed for so-called “quadplay” packages of telecoms and TV.
Sky was talking “to everyone”, he said, adding there were no “immediate plans”. It could strike a commercial deal with a UK mobile operator, from a marketing arrangement to a mobile virtual network operator agreement.
Its recent focus has been on international growth, closing the £6.9bn acquisition of its European sister companies, Sky Italia and Sky Deutschland, from its own largest shareholder, Rupert Murdoch’s Twenty-First Century Fox, and other smaller shareholders.
In March 2013 Sky agreed to buy O2’s broadband business, paying up to £200m for about 500,000 customers in the UK.
EE and O2 have each been valued at more than £9bn.