BT has taken a hit as Sky has opted for CityFibre, a competing network provider, as its secondary broadband partner. This move comes as both telecom giants race to expand full-fibre coverage across the UK.
CityFibre, a key player among alternative network providers, announced on Tuesday 20th August that it is preparing to make Sky鈥檚 on its network starting next year. Sky highlighted that this partnership would primarily target areas where there is no overlap with BT鈥檚 Openreach network.
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What Does This Mean for BT and Sky鈥檚 Existing Agreement?
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Currently, BT and Sky have an established deal under which all of Sky鈥檚 broadband customers, totaling over 6.5 million as of late 2022, are hosted on BT鈥檚 Openreach network. These customers are expected to remain with Openreach, while new Sky subscribers in areas not covered by Openreach will be connected via CityFibre.
As a result of this announcement, BT鈥檚 shares dropped 6.4% to 拢1.36 on Tuesday 20th August.
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Can CityFibre Gain a Strong Foothold in the Market?
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CityFibre鈥檚 CEO, Greg Mesch, described the deal as 鈥渧ery significant,鈥� noting Sky鈥檚 influential role in the industry. He mentioned that both companies will focus on CityFibre鈥檚 wholesale model, steering clear of retail market competition.听
CityFibre has already extended its infrastructure to 3.8 million premises, with 450,000 customers. It aims to reach at least 8 million premises in the future. This year, CityFibre also strengthened its position by acquiring rival alternative network provider Lit Fibre.
Amber Pine, Sky鈥檚 Managing Director of Connectivity, emphasised that the partnership would allow Sky to deliver 鈥渇ast, reliable, and great value broadband鈥� to more UK homes. Sky is set to join other national service providers like Vodafone, TalkTalk, and Zen Internet in utilising CityFibre鈥檚 network.
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Will This Deal Pressure BT鈥檚 Openreach?
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According to Karen Egan, head of telecoms at Enders Analysis, this deal is a positive development for CityFibre, but it could also pose challenges for Openreach by exerting downward pressure on its wholesale prices.听
Meanwhile, Matt Howett, CEO of Assembly Research, suggested that the deal might not cause substantial losses for Openreach, as CityFibre plans to concentrate on rural areas where Openreach鈥檚 presence is minimal.
In response to the Sky-CityFibre partnership, Openreach stated that it intends to 鈥渒eep our customer base with Sky鈥� and noted that the move follows the increasing competitiveness in the UK鈥檚 fibre broadband market. BT鈥檚 financial outlook remains unchanged, with the company acknowledging that Openreach was expected to lose market share in an increasingly crowded field.
Earlier this year, BT reported a loss of 196,000 Openreach broadband lines in the quarter ending 30th June. The company attributed this decline to stronger competition and a sluggish market for new broadband connections and homes. In May, BT projected that Openreach could see even greater losses in the next year, particularly if market conditions remain weak.
