O2 buys broadband provider Be for £50m

SeaSide

Missed this one. Lots and lots of movement into fourplay

O2 buys broadband provider Be for £50m

Dan Milmo
Tuesday June 20, 2006
The Guardian

Mobile phone operator O2 became the latest telecoms company to enter the fixed-line world on Tuesday with the acquisition of Be, the British broadband provider, for £50m.

Be is building a national broadband network and expects to cover 50% of the UK population by the end of the year and two-thirds by late 2007. Peter Erskine, chairman and chief executive of O2, credited inspiration for the deal to O2's new owner, Spanish telecoms giant Telefonica, which acquired the business for £17.7bn last year, and O2's experience in other European markets.

"The O2 group benefits greatly from the experience of Telefonica and insight into other markets such as the Czech Republic and Germany, where customers have clearly demonstrated a demand for integrated broadband and mobile packages. Building on our existing fixed/mobile capacity in Germany, the Czech Republic and Isle of Man, Be's superior broadband operations and services help us fulfil our previously stated aim of adding high quality broadband capability to our portfolio in the UK," he said.

Voice calls, which account for around 80% of mobile phone company revenues, are threatened by a proliferation of virtual mobile operators, such as Virgin Mobile, and the rise of internet telephony. As a result, the companies that once sounded the death knell for fixed-line telecoms are looking to businesses that provide internet connections to households. Mr Erskine, whose business has 16 million UK customers, said this year that convergence of mobile telephony and the internet had been discussed for more than a decade but would start to happen "over the next two to three years".

Carphone Warehouse's move this spring to offer "free" broadband through its TalkTalk operation sparked a rush to offer bundled services. One way to do that is to buy the internet service providers that are installing equipment in BT exchanges. O2 is following that route with Be, which has put internet-enabling technology into more than 150 exchanges in a process called local loop unbundling. Satellite broadcaster BSkyB has acquired Easynet with the same strategic aim.

Orange, one of O2's biggest competitors, has merged with internet service provider Wanadoo and is offering free broadband to customers who sign up for a mobile package - similar to the TalkTalk proposition. However, the most significant convergence deal in the telecoms sector took place on Monday with the merger of Nokia's telecoms network business, which specialises in mobile networks, with the fixed-line network business owned by Siemens in a deal valued at up to €25bn.

Carrie Pawsey, a senior analyst at Ovum, said signs of convergence were being displayed at all levels of the telecoms industry. At corporate level, Telefonica and Norway's Telenor are reintegrating their mobile phone arms. At customer level, improvements in technology have allowed BT and Vodafone to launch BT Fusion, which offers handsets that use the Vodafone network outside the home and switch to BT fixed lines inside, alternating between mobile and fixed-line rates.

"Mobile operators are realising that a mobile-only play is not going to be sufficient in the future and they need to look at diversifying product portfolios, while offering some sort of converged solution," she said.

MrShadow

Wonder how long it will take to come to Ireland

cgarvey

o2 are touting HSDPA BB now on ENN as well, saying they're not interested (sorry Digiweb!) in a fixed provider for now (in Ireland that is).