BSkyB Broadband Plans With TalkTalk Challenge BT in U.K.

Apr 15, 2014 8:48 am ET

(Adds BT Openreach comment, starting in fifth paragraph.)

April 15 (Bloomberg) -- British Sky Broadcasting Group and TalkTalk Telecom Group Plc formed a joint venture to create a high-speed broadband network in York, England, as the companies look for alternatives to BT Group Plc.

The two companies have partnered with CityFibre Infrastructure Holdings Plc, which already has fiber in the city, and will work with Fujitsu Ltd. to offer speeds of 1 gigabit per second starting next year, BSkyB and TalkTalk said in a statement today. That’s more than three times faster than the speeds offered by BT’s Openreach network.

The venture said it may add another two cities later. The partnership may take market share from BT or force the U.K.’s biggest fixed-line company to cut wholesale pricing if it’s extended to other parts of Britain, Espirito Santo analyst Robert Grindle said in a note to investors.

The “economics can be very attractive when you have the size of customer bases that BSkyB and TalkTalk do,” CityFibre Chief Executive Officer Greg Mesch said in an interview. The venture has been set up to “understand demand from customers.”

BT’s Openreach sells access to the operator’s fixed-line network to companies that want to offer Internet services in the U.K. Openreach welcomes competition, its head Joe Garner said in an e-mailed statement today. It already offers fiber to York as well as 18 million homes and businesses.

“The U.K. is already ahead of France, Germany, Spain and Italy” for fiber growth, Garner said. A report from the telecommunications regulator Ofcom shows that speeds in the U.K. have increased 48 percent in the past year, he said.

Openreach Extends

Openreach brought in 5.07 billion pounds ($8.48 billion) in the fiscal year ending in March 2013, accounting for more than a fifth of sales. The company is spending 2.5 billion pounds to extend Openreach’s fiber service to two-thirds of the U.K.

BT stepped up competition with BSkyB last year when it introduced a premium sports channel for TV customers, and outbid BSkyB for rights to popular soccer broadcasts including UEFA Champions League and Europa League games. The company also struck a partnership in October with EE, the U.K. joint venture owned by Orange SA and Deutsche Telekom AG, to offer mobile service.

BT rose 3.9 pence to 360.1 pence in London trading at 1:42 p.m. TalkTalk declined 3.0 pence, or 1 percent, to 285.1 pence and BSkyB rose 3 pence to 880 pence.