Sky to launch mobile phone service in partnership with O2 operator

Deal is expected to make Sky into a "quad play" company

Sky is set to launch a mobile phone service in partnership with O2 operator Telefonica.

The news is just the latest in a series of deals and takeovers bringing change to the industry as mobile and broadband providers vie to offer customers services that include both those services as well as fixed line and TV, in a strategy described by analysts as "quad play".

It comes days after Spain's Telefonica said it was in talks over a £10 billion deal to sell the O2 network to Li Ka-shing's Hutchison Whampoa, which owns Three - in a move that would create the biggest UK network by some distance.

However, it is understood that this will not affect Sky's plans.

The news also comes after rival BT announced that it was in discussions to buy Britain's current biggest operator EE for £12.5 billion.

Sky said it was already the UK's most popular "triple play" provider with almost 40 per cent of its customer base now taking all three of its TV, telephone and broadband services.

It said today's "multi-year" deal - understood to be somewhere between two and 10 years - would give it wholesale access to services over Telefonica's nationwide network as it launches mobile services from 2016.

The Spanish-owned network has already made wholesale deals with other brands including Tesco Mobile and TalkTalk and it is thought that opening it up further may help allay possible regulatory concerns about O2's tie-up with Three narrowing competition.

Jeremy Darroch, Sky's group chief executive, said: "As the UK’s leading brand for home entertainment and communications, Sky has a proven ability to launch new services, at scale. 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.

"Through our partnership with Telefónica UK, we can build on our expertise in content, innovation and service to launch a range of exciting new services and exploit the opportunities for growth in the fast-changing mobile sector."

Ronan Dunne, chief executive of Telefónica UK, said: "We’re pleased to welcome Sky to our roster of innovative, successful partnerships, through which we help partners grow their offer to customers. Sky understands the importance of a strong network and excellent customer experience and has made us a trusted partner to help deliver brilliant services.

"This will widen consumer choice still further and demonstrates the lively competitiveness of the UK market. We’re looking forward to working with Sky."

The latest announcement will not affect Sky's existing tie-up with Vodafone allowing customers to access Sky Sports or Sky's pay-as-you-go NowTV service.

Last November, Sky changed its name from BSkyB after it completed the acquisition of Sky Italia and a majority interest in Sky Deutschland. The enlarged company now serves 20 million customers in three of Europe's four biggest markets.

Additional reporting by Press Association