Sky to Offer Broadband with CityFibre, Hurting BT Shares
- Sky announces broadband partnership with CityFibre, adding to its services.
- BT shares drop by nearly £1bn after the news breaks.
- Competition in the broadband market intensifies with Sky's new deal.
In a significant market shift, BT Group saw nearly £1 billion wiped off its market value on Tuesday after Sky announced plans to utilize CityFibre’s fibre optic network for broadband services. This strategic move by Sky is expected to intensify competition for BT’s Openreach division, leading to a more challenging landscape for the telecom giant. BT's share price dropped over 6%, reversing much of the gains made following the recent investment by Indian conglomerate Bharti Enterprises, which acquired a 24.5% stake in the company. Sky's decision to partner with CityFibre raises concerns among BT investors, as analysts from Citi highlighted the potential impact on BT's market position. With 14 million homes in the catchment area for full-fibre internet and plans to expand connections to an additional 6 million, the competitive pressure on BT is mounting. The company is currently vying for market share against Virgin Media O2, which aims to reach 5 million households by 2026. The competitive landscape also includes other players such as Community Fibre, nexfibre, and Gigaclear, which are gradually expanding their reach. CityFibre’s CEO, Greg Mesch, emphasized that the partnership with Sky solidifies CityFibre’s status as the UK’s third digital infrastructure platform, indicating a shift in the market dynamics. Despite the challenges posed by alternative networks, some analysts, like Danni Hewson from AJ Bell, suggest that CityFibre's limited scale and focus on rural areas may mitigate the impact on BT's overall business strategy.