BSkyB's pending O2 UK purchase faces regulatory scrutiny

BSkyB's recent proposal to acquire the wireline assets of Telefonica's (NYSE: TEF) O2 UK subsidiary is facing a review by the UK's Office of Fair Trading (OFT).

BSkyB signed an agreement earlier this month to acquire O2 UK's wireline operations for up to £200 million ($303.4 million).

Initially, BSkyB agreed to pay £180 million ($270.7 million) to acquire 500,000 subscribers from Telefonica O2, and later a £20 million ($30.1 million) after meeting certain customer migration milestones.

Upon completion, O2 and BE customers will be migrated onto Sky's unbundled broadband network, which is supported by its all-fiber core network, which currently reaches 84 percent of all homes in the UK.

In its review, OFT said it will examine if the pending acquisition "has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition."

The OFT's concerns are certainly valid. When the deal is completed, BSkyB will surpass Virgin Media (Nasdaq: VMED) as the second largest broadband provider in the UK, trailing only BT (NYSE: BT).  

Service providers or industry groups have until April to submit comments.

For more:
- TeleGeography has this article

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