Sky buys O2 and Be Broadband's broadband and landline businesses

BSkyB has bought O2 and Be Broadband's broadband and landline services. What does it mean for existing customers? Is it time to switch?

BSkyB has purchased O2 and BE Broadband's consumer broadband and fixed-line telephone businesses.

More than 500,000 customers of these two brands (currently owned by the UK arm of Spanish mobile giant Telefónica) will become Sky customers once this deal completes. This is expected to be in late April.

Sky then expects to migrate these customers to its own network within six months.

Reach for the Sky

Since Sky entered the broadband market in 2006, it has added more than 4.2 million customers, making it the UK's fastest-growing broadband and telephone provider.

The acquisition of Telefónica UK's consumer broadband and fixed-line telephone businesses will propel Sky to become the UK's second-biggest broadband provider. This will push Virgin Media into third place, behind Sky and market leader BT.

Thanks to these and other acquisitions, Sky now has links to around two-fifths (40%) of all UK households, with more than 10 million home-entertainment and communications customers.

The Sky's the limit

BSkyB employs 23,000 people, has annual revenues of £6.8 billion and is listed on the London Stock Exchange with a market value of £13.9 billion, so it's already a huge business.

Under the terms of this deal, Sky will pay Telefónica UK £180 million upfront for the consumer broadband, home-phone and line-rental customers served by the O2 and BE brands. Depending on the successful delivery and completion of the customer-migration process by Telefónica UK, Sky will pay up to another £20 million, for a top-end price tag of £200 million.

With Sky paying close to £400 a head to acquire these 500,000 customers, it will intend to recoup this investment by squeezing more income out of these new recruits. After all, Sky didn't become a FTSE 100 company and its part-owner Rupert Murdoch didn't become a global media billionaire by cutting prices and offering customers more service for less money!

Then again, if Sky wants to retain all these 500,000 new customers to add to its existing 4.2 million broadband and four million telephone customers, then it needs to tread softly. The last thing it wants is to spook these customers into fleeing by fiddling with their existing contracts or hiking prices early on.

I expect Sky to provide these new customers with some form of price freeze or guarantee for at least their first year with Sky. Likewise, major changes such as a new supplier can invalidate existing contracts, giving O2 and BE customers a chance to jump ship. Otherwise, these customers better get used to Sky's usual yearly price hikes.

Best buys for switchers

Another problem is that the O2 and BE brands both enjoy higher customer-satisfaction ratings than Sky. Some happy O2 customers may decide not to follow the herd to Sky. Indeed, this takeover is sure to send some O2 and BE customers rushing to the exits. 

On the other hand, Sky's collection of HD and 3D TV channels, Sky+ for recording living TV and Sky Go for watching TV on the move are winning over customers, with hundreds of thousands joining Sky each year.

So, what are the best bundles currently on offer for broadband, home phone, TV and combinations of the three? Here are five special offers currently available, courtesy of the friendly experts at leading comparison service broadbandchoices.co.uk. Any of these are likely to produce substantial savings for households willing to ditch and switch.

(NB: All offers are for new customers except EE, where the price quoted includes a discount for existing EE, T-Mobile and Orange mobile customers (excluding pay as you go mobile broadband) living in an EE standard broadband network area. Non eligible customers pay up to £15 a month more.)

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