Spanish telecoms giant Telefonica has sold its U.K. broadband providers, O2 and BE, along with its fixed-line business to News Corp.-owned British Sky Broadcasting (BSkyB).
It comes only a few weeks after Virgin Media, then the second largest ISP in the U.K. with 4.4 million customers was sold to rival News Corp. firm, in a fight by U.S. media conglomerates on who can control the sought-after second-place slot.
O2 Broadband and BE Broadband brands will hand over its 560,100 broadband and fixed-line customers to BSkyB for an initial payment of £180 million ($270m) to Telefonica, with another £20 million ($30m) being paid once the customers have switched.
The deal works for both companies on a number of fronts.
BSkyB will acquire half-a-million customers, adding to its 4.2 million Sky Broadband customers, leapfrogging Virgin Media's 4.4 million customers. This not only will allow BSkyB in second-place in U.K. rankings by ISP subscribers, but also gives News Corp. a chance to compete once again with Liberty Global, a rival to Murdoch's media conglomerate.
For O2 and BE-owned telecoms giant Telefonica, it can now concentrate on its U.K. and European 4G networks. Telefonica will retain hold of O2's cellular business, some 23 million customers in total, and will compete with others in the race to switch on LTE services around the U.K.
The deal has to be cleared by U.K. regulators, with a decision being made in April.
British Telecom (BT) will remain in the number-one spot with more than 6.5 million customers, with Virgin Media dropping to third-place. TalkTalk stands in fourth-place with just over 4 million customers.
Liberty Global chairman John Malone and News Corp.'s Rupert Murdoch have butted heads in the media space before. Between 2004-2006, the two firms , resulting in the purchase of a controlling stake from News Corp. in a part-cash, part-equity deal worth around $11 billion.