LONDON, Oct 4 (Reuters) - British pay-TV company Sky is in
talks about investing in Virgin Media O2's plan to extend its
network to 80% of the country, including the possibility of
spinning out the cable company's entire network into a joint
venture, a source said.
Virgin Media 02, jointly owned by Liberty Global
and Telefonica, following a deal completed on June 1,
has announced a plan to upgrade its cable network serving 15.5
million premises to full fibre by 2028, stepping up its
challenge to BT.
It wants to extend its network to another 7 million premises
in the coming years, covering about 80% of the country, once the
right "building blocks" are in place.
News of Virgin Media O2's discussions with Sky, first
reported by the Sunday Telegraph, sent shares in BT down by as
much as 8% on Monday to a six-month low.
The talks between Virgin Media O2 and Sky, owned by Comcast
, are at an early stage and involve a number of
investment structures, said a person with knowledge of the
matter, who asked not to be named because the talks are still at
a preliminary stage.
Virgin Media O2 is also in talks about providing wholesale
access to its network to broadband operators including Sky,
TalkTalk and Vodafone.
Its CEO Lutz Schueler said last month talks were progressing
but it was in "no hurry" to strike a deal.
Sky, TalkTalk and Vodafone all provide broadband using BT's
BT has embarked on its own infrastructure programme, taking
fibre to 25 million premises by the end of 2026, two years ahead
of Virgin Media's network upgrade target.
It expects Sky to remain a wholesale partner for its full
fibre network build, a separate person familiar with the
situation said on Monday. BT is also seeking a partner for some
of its investment plans.
The second source said Sky may seek to give some volume to
Virgin, but would also use BT.
Analysts at Jefferies said BT was likely to complete its
network build ahead of the Virgin plan and there were strong
reasons for Sky not to go with Virgin.
Virgin Media O2, Sky and BT declined to comment.
(Editing by Michael Holden and Barbara Lewis)