Sky Is Said to Plan High-Speed Broadband Service for Italy

Sky plans to add a high-speed broadband service in Italy to its premium content packages, seeking to shake up a market dominated by Telecom Italia, according to Bloomberg, citing people familiar with the matter.

The European pay-TV company is in talks to partner with wholesale network operator Open Fiber for the service, said the people, who asked not to be named. A deal may be reached in October and Sky could start the new offer, similar to what the broadcaster has in the U.K., as early as the first quarter of next year. Open Fiber is a joint venture between utility Enel and state lender Cassa Depositi e Prestiti.

Broadband has helped Sky add customers and revenue in the U.K. by selling internet access packaged with phone service, and entertainment like sports, TV series and movies. An alliance with Open Fiber would let Sky do the same Italy, while countering a planned push into content by broadband leader Telecom Italia.

Sky, facing rising costs for premium sports content like Premier League soccer and competition for viewers from Netflix and Amazon, has pushed aggressively into Internet service in the U.K. The company reported more than 6 million broadband customers across the U.K. and Ireland in January, and said last month that 27 percent of those subscribers are using fiber connections.

A similar development in Italy would be a clear threat to Telecom Italia, which like many of its European peers is adding content such as sports to boost monthly bills and retain customers. Telecom Italia is discussing creating a pay-TV channel in Italy with Vivendi’s Canal Plus, people familiar with the matter said last month. Paris-based Vivendi, Telecom Italia’s largest shareholder, is trying to build a Southern European content hub using its stake in the former phone monopoly.

Currently, Telecom Italia offers its broadband customers content from Sky, Italy’s pay-TV leader. Sky has similar marketing partnerships with other broadband providers in Italy, including Vodafone and Fastweb, a unit of Swisscom. Sky, which is being acquired by Rupert Murdoch’s 21st Century Fox, has also delved into the U.K. wireless market, starting a mobile-phone service using Telefonica’s O2 network last November.

For the fiscal year ended June 30, Sky Italia reported revenue of 2.46 billion pounds and operating profit of 136 million pounds. Sky has about 4.8 million subscribers in Italy. Its pay-TV rivals in Italy include Mediaset’s pay-TV business Mediaset Premium.