British regulator says Sky may have violated consumer rules

(Corrects to change "competition rules" to "consumer rules" in headline and first paragraph, corrects first date in paragraph two to May 2015 from May 2014)

LONDON, Sept 20 (Reuters) - European pay-TV group Sky (Amsterdam: BK8.AS - news) may have violated consumer rules by making it too difficult for customers to cancel or switch providers, Britain's communications regulator said on Tuesday, potentially putting the broadcaster in line for a major fine.

Ofcom said there were "reasonable grounds" to believe Sky broke the rules between May 2015 and July 2015 on its landline and broadband services, where the company is fighting with rivals TalkTalk, Virgin Media and market leader BT for subscribers.

In a sign of the fierce competition within the sector, Ofcom has fined mobile operator EE 1 million pounds ($1.3 million) for failing to handle customer complaints properly and has locked horns with Vodafone over its methods for handling complaints.

Sky (Frankfurt: 893517 - news) , which according to Ofcom is Britain's second-largest broadband provider with 24 percent market share, could face a fine of up to 10 percent of its turnover in the affected services over the period under investigation.

Sky, 39-percent owned by Rupert Murdoch's Twenty-First Century Fox, said it was "very disappointed" by the decision and would review the findings before responding.

"We are incredibly proud to have the highest customer satisfaction levels in the industry, as ranked in the last Ofcom customer service report," a spokesman said.

"We have worked with Ofcom openly and constructively throughout their investigation so are very disappointed with this provisional decision."

Sky has a month to make a written response.

Ofcom also said it would not take any action in a separate probe into whether Sky broke competition rules on terminating contracts within a two-week cooling-off period given to clients after they sign up.

Both investigations were opened last year after customers complained to Ofcom.

Known for splashing out billions of pounds on broadcast rights to big-league sports, Sky has 22 million paying customers in Britain, Ireland (Other OTC: IRLD - news) , Germany, Austria and Italy. (Reporting by Peter Hobson; Editing by Mark Potter and David Clarke (Toronto: CKI.TO - news) )