Sky to Offer Most Customers Fiber Broadband Using BT’s Network

(Bloomberg) -- Sky Plc is backing a push by BT Group Plc to move more Britons onto faster internet services, in a boost to the former monopoly.

Sky, which resells internet services from BT's network unit Openreach, has a new agreement to encourage more of its U.K. customers to take up higher-speed fiber-based connections after Openreach introduced discounts for wholesale customers in July, a spokesman said.

Openreach, under pressure from regulators and the U.K. government to modernize its national network, will benefit as users switch onto services using more fiber by being able to rip out some of the older copper that's costly to maintain. BT's national network will still largely rely on copper wires for “last-mile” connections to customers' homes.

The deal with Sky could encourage more communications operators to pursue similar agreements. In a research note, Jefferies analyst Jerry Dellis said a big initial take-up should spur companies such as TalkTalk Telecom Group Plc and Vodafone Group Plc to follow suit, without making specific reference to the Sky deal.

Dellis raised his price target for BT to 265 pence from 250. BT shares were up 0.6 percent at 224.2 pence at 11:13 a.m. in London.

Sky will encourage most of its customers to take up the faster connections, the spokesman said. The satellite broadcaster has no U.K. broadband network of its own and needs faster fixed-line data connections as more viewers switch from traditional TV channels to internet-based, on-demand services.

The BT deal means Sky can speed take-up of ultrafast and full-fiber broadband while ensuring that competition at a network level stays strong, the Sky spokesman said by email. About 40 percent of Sky's customers currently buy fiber-based broadband, up from 27 percent a year ago.

Investment Drive

Britain's coverage of the full-fiber broadband that delivers the fastest internet speeds lags many other developed countries and the government is pushing BT to move quicker to upgrade the network.

Openreach was legally separated from BT by Ofcom last year as a way to boost independence from the carrier and spur investment. The government is due to consult industry on how to further upgrade the U.K.'s fixed and wireless networks following an infrastructure review published in July.

Executives including outgoing BT Chief Executive Officer Gavin Patterson, Openreach CEO Clive Selley and Sky U.K. and Ireland CEO Stephen J. van Rooyen are due to meet with British Culture Secretary Jeremy Wright later on Monday, according to people familiar with the matter.

BT's board moved to replace Patterson in June after a period of tense relations with Ofcom. He remains in the job until a successor is found.

The Telegraph previously reported on Sky's broadband agreement with BT's Openreach and the executives' meeting with Wright.

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer

©2018 Bloomberg L.P.