Sky to launch UK mobile phone service

Pay-TV firm Sky is launching a mobile phone service next year in partnership with O2's Spanish parent Telefonica.

Sky will use Telefonica UK's wireless network, enabling the satellite broadcaster to offer mobile voice and data services for the first time.

It takes Sky into the battle for "quad play", adding mobile to its existing services of internet, landline and TV.

Offering all four services is seen as the next big UK growth area for telecoms firms and broadcasters.

Such bundled services are already popular in much of mainland Europe

"Sky has a proven ability to launch new services, at scale," said Jeremy Darroch, the company's chief executive.

The UK's telecoms market has seen several deals in recent months, and Telefonica is in talks to sell its O2 business to Hutchison Whampoa for about £10bn. Meanwhile, BT, the UK's largest fixed-line provider, is talks to buy the UK's biggest mobile operator, EE, for £12.5bn.

Sky, 39%-owned by Rupert Murdoch's 21st Century Fox, is present in more than 10 million homes and has been successful in cross-selling services.

Sky already offers Sky Go, which enables customers to watch Sky programmes across a number of devices.

Analysts welcomed the move, which they said was unlikely to be a costly drain on capital but which took Sky into a potentially important growth market.

"We would expect take-up amongst loyal customers to be relatively quick," analysts at Citi said in a research note.

The latest announcement will not affect Sky's existing tie-up with Vodafone allowing customers to access Sky Sports or Sky's pay-as-you-go NowTV service.

Last year Sky changed its name from BSkyB after it completed the acquisition of Sky Italia and a majority interest in Sky Deutschland. The enlarged company now serves 20 million customers in three of Europe's four biggest markets.