O2 spends £50m to Be a broadband player

• Tags:
• Broadband,
• Convergence

Jo Best silicon.com

Published: 21 Jun 2006 09:45 BST

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O2 has got itself into a bundle — the Spanish-owned mobile operator has snapped up ISP Be for £50m.

According to O2, the acquisition will help it get into the converged services market. It's a strategy that's been flavour of the month at rival mobile operators, Orange and Vodafone, who both unveiled their own plans to enter the broadband market earlier this month.

While Orange has its own broadband arm, formerly known as Wanadoo, and Vodafone plans to resell broadband initially, O2 opted for an acquisition due to the current climate in the broadband market.

An O2 spokesman said: "We've been looking at it for about a year. We bought someone because, given there's so much consolidation in the market, if we went down the wholesale route we don't know in whose hands that company might end up."

Martin Gutberlet, research vice president at Gartner, said O2 will have been able to draw on the experience of its new owner, Telefonica, which already has experience in broadband.

He said: "Such commercial bundling isn't necessarily leading to uptake but what's interesting from an operator perspective is that it increases customer retention and loyalty and that's the number one priority at O2."

Be is a relative upstart in the broadband market, having been founded in 2004. The company is best known as a high speed player, launching a 24Mbps service last September. Currently, the ISP has notched up around 9,000 customers, some 150 of whom are business customers.

O2's spokesman said the operator had chosen Be for its technical know-how and network infrastructure, rather than its customer base.

Paul Sumner, senior consultant at research company Analysys, said O2 will be picking up a management team with a good track record and significant experience in unbundling — installing its equipment in BT's exchanges.

Sumner said: "It's quite tricky to place it. It's not exactly clear what they're paying £50m for. There are a lot of unbundlers already in the exchanges they're going for [such as AOL and Tiscali] and it's very competitive. I would strongly suspect they will start offering BT's wholesale services in areas that aren't currently covered by unbundling."

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