BT shares rocked as Sky’s CityFibre deal reignites rivalry

BT Group (LSE:BT.A) shares closed more than 6% lower on Tuesday as old rival Sky once reignited competition – with a new team-up with CityFibre putting down the gauntlet in BT’s arena.

Sky and BT were fierce competitors through the broadband and pay-TV bundling era, but the rivalry cooled in recent years after UK watchdogs pushed the companies to strike reselling partnerships to allow both sets of TV packages to be available to all customers on the respective platforms.

The subsequent sale of BT Sport to TNT, a brand under the Warner Bros Discovery umbrella, further eased the competitive tensions.

That was until today, as Sky announced a long-term partnership with CityFibre to offer broadband services through CityFibre's network starting next year.

It aims to give Sky the capacity to expand its broadband services via CityFibre’s network, especially in rural areas.

BT's Openreach currently provides broadband infrastructure for Sky's 5.7 million customers.

Meanwhile, CityFibre's network aims to cover 8 million premises.

City analysts reacted by noting that while CityFibre's current reach is smaller than Openreach's, the growing competition could pressure BT to reconsider its pricing and service strategies.

In a statement, meanwhile, CityFibre chief executive Greg Mesch described the partnership as a strong endorsement of the company’s position as the UK's third-largest digital infrastructure provider.

In London, BT shares dropped 9.3p or 6.4% to finish Tuesday’s dealing at 136.30p.