BT shares fall on rumours of Sky defection to Virgin

A recent report claimed Sky is turning towards VMO2 for its fibre needs, but BT insists its relationship with Sky is still fine.

The rumour comes courtesy of the Sunday Telegraph in a piece headlined ‘Sky closes in on broadband investment deal with Virgin Media O2’. The rest of it is behind a paywall but the long and short of it is that Sky is thinking of investing in the VMO2 fibre roll out, which ultimately suggests that’s where it will derive its fixed-line network rather than Openreach, which is currently the case.

Reuters followed up with BT and got an unattributed comment from someone close to BT saying it still expects sky to remain a major wholesale partner for its full fibre network build. That’s not the strongest rebuttal of the story and clearly leaves open the possibility that the situation could change at any time.  While BT’s shares recovered a bit from the initial response to the rumour, they were still down 5% at time of writing.

To the best of our knowledge Sky doesn’t directly invest in Openreach, but as a major customer it kind of does by providing the financial security and confidence for BT to spend big. This could all be a false flag put out by Sky to keep Openreach honest and remind it not to take Sky for granted. On the other hand, the prospect Sky investing in a direct competitor raises all kinds of intriguing possibilities, not least for regulators.