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BT has suffered a blow after Sky chose rival network provider CityFibre as its second broadband partner while the two telecoms groups compete to roll out full fibre across the country.
CityFibre, which is one of dozens of alternative network providers — or “altnets” — said on Tuesday that work was under way to make Sky’s broadband available to people on its network next year. Sky said that this would focus on areas where there were no overlaps between it and the network provided by BT’s Openreach.
BT and Sky have an existing agreement under which the telecoms group hosts all of Sky’s broadband customers. Sky last reported the number as more than 6.5mn subscribers at the end of 2022. These customers are expected to remain on the Openreach network while new Sky customers will use CityFibre in areas where Openreach is not present.
Shares in BT were down 7.4 per cent at £1.35 in early afternoon trading.
Altnets’ attention has turned to winning customers after investors poured billions into the sector, with some providers having been forced to consolidate and cut jobs.
CityFibre chief executive Greg Mesch said the deal was “very significant” as Sky was a “kingmaker” in the industry. He added that the agreement would allow the company to focus on its wholesale business model rather than considering entering the retail market.
CityFibre’s infrastructure has passed 3.8mn premises so far and it has 450,000 customers. It wants to pass at least 8mn premises in the coming years. The company acquired rival altnet Lit Fibre this year.
Amber Pine, managing director of connectivity at Sky, said the partnership with CityFibre meant it could “provide fast, reliable and great value broadband to more homes across the UK”.
Sky will join Vodafone, TalkTalk and Zen Internet as national service providers using CityFibre’s network.
Karen Egan, head of telecoms at Enders Analysis, said the announcement was “a very positive move forward for CityFibre”, adding that it was “not good news” for Openreach and could potentially put some pressure on its wholesale prices.
However, Matt Howett, founder and chief executive of Assembly Research, said he did not think there would be “huge cannibalisation” because CityFibre plans to focus on rural areas.
In response to news of the Sky-CityFibre deal, Openreach said it would “keep our customer base with Sky” and that the news was expected as the UK’s fibre broadband market “becomes ever more competitive”. BT’s financial outlook for the year was kept unchanged, with the group noting such guidance always assumed Openreach would lose market share.
The FTSE 100 group recently reported Openreach broadband line losses of 196,000 in the three months to the end of June, with “moderately higher competitor losses combined with a weaker overall broadband and new homes market”.
In May, BT said it expected Openreach’s broadband base to be affected by “moderately higher competitor losses” over the next 12 months than the 491,000 lost in its 2024 financial year if the market remained weak.