BSkyB's £200m for O2 broadband set-up

BSkyB made a significant move to grow beyond pay-TV yesterday, paying up to £200m for mobile giant O2's broadband and fixed-line operation.

The move means Sky leapfrogs rival Virgin Media to become the UK's second-biggest broadband provider by customer numbers and also closes the gap with market-leader BT.

Sky is best known for pay-TV with more than 10 million subscribers but has quietly built up a substantial broadband business since 2006, with 4.2 million customers.

Buying O2's broadband business will add a further 500,000 customers, taking Sky's total to 4.7 million against Virgin, with about 4.5 million, and BT on 6.6 million.

Sky, 39 per cent owned by Rupert Murdoch's News Corporation, will have been especially keen to boost the company's broadband operation after US cable giant Liberty Global's $23.3bn (£15.3bn) swoop for Virgin Media last month.

Sky's broadband acquisition will also raise the pressure on the telecoms giant BT, which has been trying to undermine Sky by expanding into pay-TV and buying up sports rights in recent months.

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