11:27am UK, Friday October 21, 2005

BSkyB has agreed to buy broadband provider Easynet for £211m to help it expand into the fast-growing market for high-speed Internet connections.

It is to pay 175 pence in cash for each Easynet share, a 38% premium to their closing price on Thursday. 

180 bskyb building logo athena court

Broadcaster expands again

The deal is expected to allow it to offer broadband, video-on-demand and telephony services to customers.

This will put itin head-to-head competition with the merging cable companies NTL and Telewest, as well as BT.

The deal had been widely tipped in the City, Easynet confirming several days ago that it had received an approach from a potential suitor.

Early reports had predicted that BSkyb, the UK's biggest pay-television company, could pay up to £150m.

In early September Easynet reported a small rise in first-half underlying core profit.

The firm added at the time that it expected to post a net profit in 2006.

Underlying core profits from continuing operations rose to £3.3m for the six months to June 30, against £3.2m 12 months earlier.

Revenues rose by 12% to £77.1m and Easynet said it was cash flow positive in the second quarter. 

James Murdoch, chief executive of BSkyB, said: "Today's offer reflects the exciting opportunities that now exist to combine quality entertainment with significant high-speed connections." 

He added the deal gave BSkyB access to an IT network covering around 50 towns and cities in the UK, which was similar to the footprint of Telewest. 

The target was to have equipment in 1,000 exchanges and access to 75% of homes around the country.