Various press reports suggest that Hutchison is close to signing a £3 billion capacity agreement as part of its plan to buy the O2 cellular network from Telefonica.

The reports say that Sky will pay around £2 billion for 20 per cent of the capacity, and Virgin Media will pay to acquire a 10 percent slice of the available capacity.

Equity analysts at Exane-BNP/Paribas say it is difficult to see how the final deal might shape up, “but what we can say is that the UK telecom landscape is in the midst of significant regulatory and competitive change, and we see a favourable risk/reward for Sky and TalkTalk and a less favourable for BT.”

The bank adds: “Sky is likely to be the immediate relative winners in this scenario, with remedies giving them network access at potentially favourable terms.  At a cost of £2 billion over 10 years (perhaps £200 million p/a, although the [reports] lack detail on the shape and conditions of the deal) Sky could use its strong execution track record and marketing expertise to monetise this investment over its large 10m+ subscriber base. Reassuringly, the leaked potential deal terms do not include fixed asset acquisitions, which would be a break with Sky’s long term asset light model.”

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