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Sky to offer fibre broadband on CityFibre's network next year

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Adding second network is a blow to existing partner BT

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BT's shares fall 6%

LONDON, Aug 20 (Reuters) - British TV company Sky will launch its broadband services on internet provider CityFibre's network, the companies said on Tuesday, a blow to Sky's existing partner BT, whose shares fell more than 6%.

CityFibre said Sky would roll out its full fibre broadband product on its network next year.

The deal is a challenge to BT, the country's largest broadband and mobile operator, whose Openreach network is also used by Sky to provide broadband.

Sky is the largest third-party broadband provider on Openreach, with around 5.7 million customers, and the addition of a second network by Sky had long been a concern for BT investors, Citi said.

Shares in BT fell more than 6% to 135.5 pence, the worst performer on the FTSE index.

Citi's analysts, however, said they believed the financial impact for BT was manageable, noting that Sky would maintain its long-term relationship with BT's Openreach given the significantly larger size of its network.

Sky's fibre broadband would be available on CityFibre's 3.8 million premises next year, CityFibre said, and longer term it would be offered to the 1.3 million homes it is connecting in remote regions with government support.

CityFibre has plans to expand to 8 million premises, challenging the dominance of BT's national Openreach network and Virgin Media O2's second ranked network.

"This partnership with Sky is a huge vote of confidence in our business and has cemented CityFibre's position as the UK's third digital infrastructure platform," CityFibre Chief Executive Greg Mesch said.

Openreach said the move was expected as Britain's fibre broadband market became ever more competitive.

"We're building fibre faster, more efficiently and providing better customer experience than anyone" with more than 15 million premises reached, and an ambition of up to 30 million by the end of the decade, a spokesperson said.

CityFibre is backed by Goldman Sachs and Antin Infrastructure Partners. (Reporting by Sachin Ravikumar and Paul Sandle; Editing by Kate Holton and Conor Humphries)