Analyst Expects Sky to Bid for Budget UK Internet Provider Rival TalkTalk

BT’s risky £738 million grab of 38 Premier League football games (here) for its BTVision TV (IPTV) service has allegedly sparked rumours in the city that BSkyB (Sky Broadband) could be about to make a bid for arch rival TalkTalk, which may or may not be a good thing.

Liberum Capital’s Lawrence Sugarman today told the London Evening Standard newspaper that “we believe Sky is keen to build on its broadband position” and buying TalkTalk would allegedly be “an ideal way” to strike back at BT’s movement onto its home turf.

Naturally such talk should be taken with a HUGE PINCH OF SALT since no official offer is known to have been made and rumours like this aren’t uncommon. But would such a hypothetical takeover be a good thing? Financially it would certainly be good news for TalkTalk, which has struggled to plug a long-running customer bleed (here) that followed its troubled 2009 acquisition of Tiscali for £236m.

Similarly Sky, which currently has 3,863,000 broadband subscribers (here), would instantly take on TalkTalk’s 4 million internet users to leapfrog Virgin Media and BT; becoming the markets largest broadband ISP. But Sky already has a strong broadband platform, which is managed by Easynet, and merging that with TalkTalk’s wouldn’t necessarily produce many cost-savings, it might even cause some problems.

Sky also has an arguably better established reputation than TalkTalk, which has suffered after a series of Ofcom investigations in 2011 exposed flaws in its customer service and quality (many of which stemmed from the Tiscali buyout). Customers might well fear that the same problems that afflicted TalkTalk’s post-Tiscali landscape could well impact Sky too, which would be a disaster for customers, but then it might do exactly the opposite.

In any case this is all swings and roundabouts until somebody makes a serious offer. One thing that Sky really lacks though is a mobile service and there are more options at that end of the scale.