BSkyB is bringing the leading Pay TV businesses in three of Europe’s four biggest markets together after signing a deal with 21st Century Fox, a move that has raised speculation of a future bid from Vodafone.

The UK-based Pay TV company will acquire 21st Century Fox’s 100 percent stake in Sky Italia and its 57.4 percent interest in Sky Deutschland for a combined fee of €3.2 billion.

As part of the deal, BskyB will sell its 21 percent stake in National Geographic Channel International to 21st Century Fox for €483 million.

The enlarged company will serve 20 million customers but said it hopes to tap into the 66 percent of the 97 million households yet to subscribe to Pay TV services in its footprint.

BSkyB estimates that if the penetration of Pay TV in Germany and Italy grew to reach the current levels of penetration in the UK, this would represent a potential growth opportunity of 22 million customers.

Currently, Sky Italia is the market leader in Pay TV with 4.75 million subscribers but the number has been decreasing over the past few years.

Sky Deutschland is the market leader in Germany and Austria with a growing subscriber base of over 3.7 million households. Germany and Austria represent the largest Pay TV market in Western Europe but have one of the lowest penetration rates at 19 percent.

Revenues of the combined company will increase to €14.1 billion while BskyB said it expects to save over €250 million by the end of the second full financial year after completion.

BSkyB Chief Executive Jeremy Darroch commented: “This transaction will create a world-class, multinational Pay TV business with enhanced headroom for growth and immediate benefits of scale. The three Sky businesses are leaders in their home markets and will be even stronger together.”

CCS Insight analyst Paolo Pescatore believes the deal could interest Vodafone down the line.

He said: “This is the first time a pay TV provider has tried to conquer Europe, and if approved the company will be a force to be reckoned with. The deal would also open up further strategic opportunities to work more closely with Vodafone, with a possibility that Sky could become a takeover target for Vodafone. There’s a good fit between both companies in all of these markets driven by the need to have a strong quad play service."

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