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Avanti Strikes Deal On PM's Broadband Pledge

(c) Sky News 2015

A London-listed satellite operator will unveil a deal on Monday which paves the way for a revenue boost from David Cameron's pledge to guarantee faster broadband speeds for every UK household.

Sky News understands from Whitehall sources that Avanti Communications (LSE: AVN.L - news) will say that it has agreed a contract with BT Group (LSE: BT-A.L - news) to be part of its involvement in the Government's universal service commitment.

Announced last month, a new Universal Service Obligation - which remains subject to consultation - will mean that every UK citizen will have a legal right from 2020 to request a connection to broadband with speeds of 10 Megabits per second (Mbps) regardless of where they live.

Avanti's involvement will mean that it becomes part of BT's supply of wholesale consumer broadband services, which will be sold to consumers in the UK through a network of satellite resellers, according to Government insiders who have been briefed on the project.

Avanti's satellites would enable those consumers to access broadband speeds between 15Mbps and 30Mbps, said one.

On Sunday, Ed Vaizey, the digital economy minister, confirmed the scheme's rollout to 300,000 homes, each of which will be able to claim up to £350 towards the cost of satellite installation and a year's subscription.

"Our rollout of superfast broadband has already reached an additional 3.5 million homes and businesses who would otherwise have missed out," he said.

"This scheme offers immediate assistance to those homes and businesses in the most remote areas with the slowest speeds and is all part of our transformation of the UK's digital landscape."

The plans are being overseen by Broadband Delivery UK and will be available to homes which cannot access greater than 2Mbps from terrestrial networks.

Homeowners who join the scheme will then pay roughly £25 each month in service charges, a source said.

Ministers privately estimate that roughly one-third of the 300,000 eligible homes would be likely to take up the offer.

One analyst said on Sunday that if 50,000 homes were to use the scheme through Avanti, it would equate to £17.5m of subsidies and roughly £15m of recurring wholesale revenue to the company.

That would be a significant boost to Avanti, which is chaired by the former Diageo (LSE: DGE.L - news) boss Paul Walsh and has been building a broad-based international business.

Avanti declined to comment, while the Department for Culture, Media and Sport did not return calls seeking comment.