BSkyB swoops for Easynet

The local-loop unbundling ISP's board has unanimously recommended shareholders accept Murdoch's £211m offer

BSkyB confirmed on Friday it has made a cash offer of 175p per share for Easynet — an offer that values the ISP at £211m.

According to BSkyB, Easynet directors have unanimously recommended to shareholders that they accept the "fair and reasonable" offer.

The Murdoch-owned satellite TV provider said it had decided to acquire Easynet, which registered EBITDA of £8.9m last year, because of its significant broadband presence in the UK as well as its efforts in local-loop unbundling.

To date, Easynet has unbundled 232 local exchanges and was also the first major company to take on BT in providing wholesale broadband with its LLUStream product.

It also numbers several big names in its corporate roster, including Christian Dior, H&M and Volvo, and local councils including Reading and Slough from the public sector. According to figures from BSkyB, Easynet has also unbundled lines to 18 percent — or 4.5 million — of UK homes, with 23 percent expected to be unbundled by July 2006.

James Murdoch, chief executive of BSkyB, said the acquisition will allow the company to find new outlets for its entertainment offerings.

He said in a statement: "Today's offer reflects the exciting opportunities that now exist to combine quality entertainment with significant high-speed connections. Entertainment is at the core of Sky's success... We see value for families in moving well beyond just another triple play to offer a new level of connected entertainment and communications services."

It's thought BSkyB may look to turn Easynet into more of a consumer, rather than business, ISP, opening up the potential for BSkyB and Easynet to cross-sell broadband and video-on-demand services to each others' customers.

Aside from expanding BSkyB's product range, the acquisition may have broader implications for the UK broadband market as a whole. With homes likely to be BSkyB's focus, Easynet's LLUStream — used by other companies, including Onetel — could fall by the wayside.

Ian Fogg, analyst at JupiterResearch, said: "If the LLUStream offer is slowly wound down or cancelled, it would be increasingly difficult for smaller broadband ISPs to remain competitive," as they would be tied to BT for wholesale access and consequently to lower speeds. "It's a simple numbers game — with LLUStream they have the necessary scale but without the investment."

The acquisition marks the latest signal of a trend towards consolidation in the broadband market, following the news earlier this month of NTL's acquisition of Telewest and Pipex's buyout of Freedom2Surf.