Sky to launch mobile network as battle over telecoms intensifies

Sky is still a takeover target for Vodafone given the need to have a strong pay-TV offering

Vodafone was left looking exposed last night after Sky struck a deal to launch its own mobile telephone services with O2 in the latest frenzy of deals bringing media broadcasters and mobile operators ever closer.

Sky will piggyback on the network of O2’s owner Telefonica UK, which agreed only last week to be bought by Hutchison, the Hong Kong owner of the Three mobile network.

However, the move is far less deep a commitment to mobile than that of BT, which is paying £12.5bn to buy EE outright. Sky did not have the financial firepower to launch such a bid, so has entered into a partnership with Telefonica UK, similar to that of Tesco Mobile.

Sky did not provide details of the financial terms of the partnership but said it would have wholesale access to 2G, 3G and 4G coverage over O2’s network and would be able to offer mobile services to customers on Sky bills from 2016. Some analysts said the move meant Sky could still link up with Vodafone at a later stage. Paolo Pescatore, at CCS Insight, said: “We still believe that Sky is a takeover target for Vodafone, given the mobile operator’s need to have a strong broadband and pay-TV offering.”

Other analysts said the pressure on Vodafone to act fast was slightly reduced by last week’s Hutchison bid for O2 because the easing of competition would inevitably mean that all companies would be able to put up their prices, protecting Vodafone’s profit margins.

Vodafone will continue with its existing relationship with Sky, offering Vodafone customers access to Sky Sports on 4G. But yesterday’s partnership was still seen as another missed deal for the UK mobile operator.

Sky’s chief executive, Jeremy Darroch, was bullish about its latest move. “Sky has a proven ability to launch new services, at scale,” he said. “We know our 11.5 million customers trust Sky to offer them the best quality and choice and have an appetite to take more from us.”

Mr Darroch’s counterpart at Telefonica, Ronan Dunne, added: “We are pleased to welcome Sky to our roster of innovative, successful partnerships, through which we help partners grow their offer to customers. This will widen consumer choice still further and demonstrates the lively competitiveness of the UK market.”

More than 10 million homes in Britain subscribe to Sky and it has succeeded in selling a growing number of services to customers in recent years.