British DTH giant Sky has mandated Lazard to advise it on the convergence that looks set to take place in the UK telecoms sector.
The move follows Sky’s rival in pay-TV and broadband, BT, confirming last week that it was in talks to buy either O2 or…
British DTH giant Sky has mandated Lazard to advise it on the convergence that looks set to take place in the UK telecoms sector.
The move follows Sky’s rival in pay-TV and broadband, BT, confirming last week that it was in talks to buy either O2 or EE – a move which would allow the British incumbent to add mobile to its suite of services.
TelecomFinance understands that Sky has hired the bank to explore possible deals and evaluate its options. However, the company is not on verge of any deal and considers the appointment of Lazard as standard practice in the circumstances, a person familiar with the matter said.
Both Sky and Lazard declined to comment.
It is suggested that the DTH operator is considering whether to pursue mobile. Its broadband rival Virgin Media already has an MVNO, while BT and TalkTalk are preparing to launch new MVNO services, piggybacking on EE and O2’s networks respectively.
Sky currently has a relationship with Vodafone whereby the mobile operator offers its content.
Sky’s CEO, Jeremy Darroch, has previously expressed scepticism that there is real consumer demand for quad-play bundles, but has said it would be logical for the company to offer mobile.
In a quarterly results conference call in October, Darroch said: “On quad-play or in fact any service, we’re going to be led by what we see the customer wants. If I look at the existing quad-plays in the market, not just in the UK, but pretty much everywhere, I think they’re very much driven by the providers who want to extend their offering, rather than, I think, any significant demand from customers. But having said that, we’ll always remain open to opportunities, and this is something that we keep a close eye on.
“We keep our options under review. If we thought there was strong customer demand, then we can be in a good place to respond. We’ve got a very significant customer base already that we know we can cross-sell into very successfully. We’ve obviously got a really good marketing capability, and we’ve got good relationships with all the mobile operators, so it would be a good distribution channel for one or all of them. So we’ll keep watching what goes on, but as I say, right now we don’t see this as a huge customer idea, but if it changed, then we may look again.”
Vodafone has itself been rumoured to be considering making its own convergence play. The company is reported to be having discussions regarding an acquisition of pan-European cable group Liberty Global – owner of Virgin Media – and is weighing up the viability of a deal. One significant stumbling block to that deal is Liberty’s net debt pile, which stood at US$41.1bn as of 30 September following its acquisition spree over the past few years
If that merger were to take place, however, it would make it extremely difficult for Sky to maintain its relationship with Vodafone, let alone launch an MVNO using the telco’s network.
Meanwhile, Hutchison Whampoa, owner of the UK’s smallest network operator Three, is reported to be waiting for BT to make its move for EE or O2 and could then look at the possibility of buying the mobile player the incumbent passes on.
But Hutchison could face competition from private equity firms in its acquisition plans. KKR and Apax are reported to be considering buying EE again, if BT overlooks it, but not O2, which they do not see as an attractive asset. CVC Capital Partners, which was also previously linked to buying EE, is reportedly no longer interested.
