Sky And Vodafone Discuss Possible Alliance To Combat BT – Report

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Fearing challenges to their TV and mobile businesses, Sky and Vodafone could team up

Vodafone and Sky have reportedly held “high level talks” to discuss a possible alliance against BT’s growing power in the broadband market and imminent entry into mobile phone services.

According to The Sunday Times, the two companies have explored the possibility of deals for Sky Sports and Sky Movies, Vodafone already offer Sky Sports Mobile TV to its 4G customers, as well as the creation of a fibre network, but sources told the newspaper the latter was unlikely given that the bill could run into billions of pounds. Vodafone and Sky have declined to comment to TechWeekEurope.

BT has purchased around £2 billion worth of sports television rights, including the Premier League and UEFA Champions League football competitions, to prevent its broadband customers from being tempted away by Sky’s own Internet service, which is bundled with its satellite television offerings.

Sky Vodafone union

BT Sport (3)The investment appears to already be paying off, with BT adding 195,000 new and existing users to its fibre customer base in the second quarter of 2013. BT Sport is free to any BT broadband customer and more than two million have signed up for the channels.

The former state monopoly’s spending spree has impacted Sky’s share price and investors are concerned that if its rights portfolio is eroded any further, it will struggle to justify the price it charges for its sports packages.

BT has signed a multi-year Mobile Virtual Network Operator (MVNO) agreement with EE and could bundle mobile phone contracts with broadband, phone and TV services as part of ‘quad-play’ packages.

Vodafone fears its lack of a fixed broadband network could hold it back in a quad-play environment, especially since such bundles are popular in the rest of Europe. The British operator has started building fibre networks in Italy and Spain, and has also agreed a £6.6 billion deal for Kabel Deutschland in Germany.

The company could reach a wholesale agreement with BT to operate fibre services through the open access Openreach network, but the lack of strict regulation means that Vodafone could gain very little by offering Internet services in this manner. TalkTalk in particular has called for tighter regulation of the fibre market, claiming it is not as competitive as copper broadband.

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