Vodafone has been investing aggressively in wireline assets, to build quad play bundles in several key European markets. It is being more hesitant, however, in its home country, and admits it will not make a firm decision on its UK strategy until it assesses the impact of a mobile re-entry by fixed line incumbent BT.
Jeroen Hoencamp, UK CEO of Vodafone, told The Daily Telegraph newspaper last week that BT is a potential problem for the mobile giant’s recovery plan – group CEO Vittorio Colao said last week he was targeting a return to revenue and profit growth within 18 months. In the UK, however, BT is expected to spark a new price war when it launches its own consumer mobile offerings early next year.
Hoencamp told the newspaper: “We’re keeping our options open and I’m not going to go into that space before we actually believe that market is there. We need to see real evidence of the market and consumer uptake in a way that is damaging to our business. If that happens we will have to look at our own propositions, whether on the mobile side or what we would consider on the fixed side.”
He concluded: “We have scenarios of what we think the competition is going to do and we’re ready to go. But I’m not yet convinced.”
BT exited the mobile space, apart from some low-key MVNO offerings, when it demerged its cellular arm (now Telefonica O2) in 2001. However, it acquired spectrum in the UK LTE auction and created a broad partnership with the leading cellco, EE, earlier this year. It has already launched some mobile business services but the real disruption will come if it offers consumers cut-price bundles of mobile, telephone, broadband and TV, building on its successful triple play platform, which has seen aggressive acquisition of exclusive TV rights in areas like premier league soccer.
BT is likely to make heavy use of its base of broadband lines and its deal with FON, to expand its coverage and services through WiFi ‘homespots’, a tactic which has been used, to devastating effect on the cellcos, by Free in France.
The moves by BT could limit Vodafone’s options as it considers whether to mount its own quad play in the UK, as it has in Germany (via the acquisition of Kabel Deutschland), Spain (with its Ono purchase) and other markets such as Portugal and Greece. Vodafone did buy UK fixed line player Cable & Wireless Worldwide in 2012, but this was mainly for business and services offerings.
Meanwhile, a BT quad play could put pressure on Vodafone and its rivals to cut mobile and other service prices. Vodafone’s LTE packages are already more expensive than those of competitors and it has not yet achieved the same level of market share in 4G that it has enjoyed in 2G and 3G. However, Vodafone is expected to reduce its prices soon in the wake of a round of cost-cutting, including the streamlining of its retail activities. That initiative saw its controversial decision to end its relationship with retailer Phones4U.
Hoencamp spoke of the BT threat at an event in London last week, saying: “Am I concerned? Not yet. Do we keep a very close eye? Absolutely. Will we respond if needed? Absolutely. What would worry me is if the customers would actually buy it.” He was taking hope from the limited uptake of leading cableco Virgin Media’s quad play proposition.
Virgin is owned by Liberty Global, the US-based, pan-European cableco, with which Vodafone has been repeatedly linked as a possible merger candidate. Colao fuelled those fires this month by saying he would consider an acquisition of his arch-rival “for the right price”.