BT, once owner of O2 and biggest telecommunications company in the UK, is to buy EE for a total of £12.5 billion. The deal will create a telecommunications giant which covers fixed-line phones, broadband, mobile and TV with unparalleled synergy between the two companies. It will also allow BT to bolster their offerings across all sectors and mount a realistic challenge to Sky's throne, but what does the deal mean for Sky in the short, medium and long term? Read on to find out what we think.
Sky have been struggling to handle Virgin Media's so-called 'quad play' packages, which combine home phone, mobile, broadband and TV into one easy to manage package. With this deal, BT now have the capability and infrastructure to offer a similar deal to Virgin, but with dramatically lowered costs thanks to the shared ownership of the companies. If BT wished, they could waive profit at the EE end in order to deliver low cost packages to consumers who might be tempted by BT's offering. At Sky's end, they've just inked a deal with O2 which will see O2 acting as a MVNO for Sky's new mobile offerings, which should stop the customer requests through the Sky landline number. That deal lasts five years, though it's impossible to predict what the pay TV landscape will look like in a few years, but it's likely that it will look significantly different to how it does now. There's also the possibility of Three purchasing O2, but that's up in the air at the moment.
Over the next few years Sky will seek to boost its original offerings and differentiate itself from an incredibly competitive crowd. With BT able to offer end to end savings, Sky will have to compete in different areas, producing high quality TV (like Fortitude) and continuing to import some of the worlds best TV like Game of Thrones and Mad Men in order to stand out from the crowd. Sky's European arms will also begin to stretch their muscle, producing bold TV in their own languages for Sky in the UK to offer to customers also.
Sky are sticking around for the long term, that much is for sure. Into the future though, it's difficult to predict how the industry will look. It wouldn't be much of a surprise to see that in 10 years Sky has purchased a mobile network of its own. Vodafone is the obvious choice, given their close relationship and Vodafone's European dominance. That being said, Vodafone will be an expensive buy, especially given the increased number customer service calls they'll have to take through the Sky phone number UK.
So, all in all, it's tough times ahead for Sky, but given their sterling executive board and legions of loyal customers, we don't expect Sky to be going anywhere any time soon. What we do expect, however, is greatly increased competition for customers, which will see better customer service and lower prices for all.
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