UK satellite television provider BSkyB has agreed to buy broadband service provider Easynet Group for £211 million.

As previously predicted by informitv, BSkyB is moving into the broadband business with the acquisition of Easynet, one of the pioneers of high speed broadband access in the UK.

The offer price is considerably higher than the £150 million figure anticipated, reflecting an 80% premium on the share price when the offer was first made a week ago, and a 38% premium on the closing share price before the announcement.

Easynet is one of the leaders in what is known as local loop unbundling, having installed its own equipment in over 230 telephone exchanges across the country, covering 4.4 million homes.

In July, Easynet announced its intention to expand its UK local loop footprint with a view to reaching up to 350 exchanges, covering approximately 5.8 million homes, nearly a quarter of the country.

The company offers a wholesale broadband service, LLUStream, in competition BT, which still provides services for the majority of broadband connections in the UK.

It also has its own consumer broadband service, UK Online, which has just 21,000 subscribers.

The total number of UK broadband connections increased from approximately 4.4 million to 8.1 million in the last year, and is projected to continue to grow further in the future.

The move into broadband access will enable BSkyB to offer a ‘triple-play’ of video, voice and data services to subscribers, placing it in direct competition with cable companies NTL and Telewest, which recently announced their own merger, and incumbent telephony provider BT.

BSkyB believes that investing in broadband will give it control over the quality
and availability of services to customers and the ability to offer differentiated and innovative products.

These could include internet protocol television, or IPTV, providing audio and video services over broadband. Significantly it will allow the satellite broadcaster to offer video-on-demand services over broadband in competition with cable companies and other service providers.

Although the sums involved are not particularly significant for BSkyB, which has a turnover of over £4 billion, the acquisition of Easynet is the boldest strategic move yet to be announced by chief executive James Murdoch. “Today’s offer reflects the exciting opportunities that now exist to combine quality entertainment with significant high-speed connections,” he said. “We see value for families in moving well beyond just another triple play to offer a new level of connected entertainment and communications services.”

“We expect to see rapid convergence between pay-TV penetration in the marketplace and broadband penetration,” he told analysts in a briefing.

“It builds on our core strengths of brand, content programming, distribution and customer service.” He described it as “a sensible approach” that “gives us the tools that we require to compete.”

David Rowe, the chief executive of Easnet said: “This is a great opportunity to accelerate Easynet’s local loop footprint, capture market share for next generation broadband services and support new and existing corporate and public sector customers.”

BSkyB announced a £1 billion bond issue, giving it significant scope for further acquisitions to place it in the forefront of the next generation of digital services.