How Will Sky’s New Partnership with CityFibre Impact BT?

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’s broadband services available on its network starting next year. Sky highlighted that this partnership would primarily target areas where there is no overlap with BT’s Openreach network.

 

What Does This Mean for BT and Sky’s Existing Agreement?

 

Currently, BT and Sky have an established deal under which all of Sky’s broadband customers, totaling over 6.5 million as of late 2022, are hosted on BT’s 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’s shares dropped 6.4% to £1.36 on Tuesday 20th August.

 

Can CityFibre Gain a Strong Foothold in the Market?

 

CityFibre’s CEO, Greg Mesch, described the deal as “very significant,” noting Sky’s influential role in the industry. He mentioned that both companies will focus on CityFibre’s wholesale model, steering clear of retail market competition. 

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’s Managing Director of Connectivity, emphasised that the partnership would allow Sky to deliver “fast, reliable, and great value broadband” to more UK homes. Sky is set to join other national service providers like Vodafone, TalkTalk, and Zen Internet in utilising CityFibre’s network.

Will This Deal Pressure BT’s Openreach?

 

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. 

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’s presence is minimal.

In response to the Sky-CityFibre partnership, Openreach stated that it intends to “keep our customer base with Sky” and noted that the move follows the increasing competitiveness in the UK’s fibre broadband market. BT’s 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.