Vodafone is set to take on Virgin and Sky, using its business fibre network and BT Openreach infrastructure. The announcement follows a period of significant growth for the telecoms company, who nudged up their full-year core earnings forecast to between £11.6 billion and £11.9 billion. In terms of pricing and what TV content will be offered, any direct announcements have yet to be made. This will mean Vodafone entering an already crowded home broadband and pay-TV market, when it launches in spring next year, with BT, EE and TalkTalk also offering their own bundles. This marks Vodafone's second attempt to move into broadband, following a failed attempt back in 2006.
The announcement follows a period of significant growth for the telecoms company
Vittorio Colao, chief executive of Vodafone, has said they will be using the 21,000km fibre optic 'backbone' network is acquired with Cable & Wireless two years ago for £1 billion, in order to reduce its costs so it can undercut rivals. As with their rivals (save for Virgin Media), they will be relying on access to BT's national network for the broadband link into homes, though Colao has suggested Vodafone might eventually team up with BSkyB and TalkTalk to invest in their own infrastructure, completely bypassing BT. Indeed, BT would appear to be the villain of the piece in this instance, as Vodafone's move is thought to be a defensive one against BT's impending attack on the consumer mobile market. As Colao has said “If they come hard into mobile we will come hard into broadband.” He did, however, decline to provide any exact details on the TV launch, instead pointing to agreements already in place with content owners.
Vittorio Colao has suggested Vodafone might eventually team up with BSkyB and TalkTalk to invest in their own infrastructure, completely bypassing BT
Left: Vittorio Colao, Right: Mark Newman
According to Mark Newman, chief research officer at Ovum, the London-based independent analysis and consultancy firm, Vodafone will need to choose to compete against their numerous rivals on price or service, which “Will be very tough for them.” For one thing, it's expensive to build fibre connections to homes, and it's also very rare for customers to switch services, especially if they've been with one of the top providers for a while, which is more than likely. Point Contact telecoms analyst, Oliver Johnson, believes the key to Vodafone's success lies in how well the services work together, with consumers now expecting to be able to use different devices in different rooms that are all connected. He said he believes that “This is where the real emerging markets are going to come, people want to switch the alarm on, order bits for the fridge, monitor their health, and record their favourite TV programme. It all starts to get stuck together.”
Vodafone's move is thought to be a defensive one against BT's impending attack on the consumer mobile market
Rumours on the stock market have also suggested that Vodafone might be eying up a takeover of TalkTalk, which is the only other large, independent broadband provider left in play in the UK. Colao, however, has said that he felt the takeover was not necessary. He also said it was far too early for the company to consider competing for major UK content rights such as the Premier League, which is up for auction in the New Year.
Benjamin Hiorns is a freelance writer and struggling musician from Kidderminster in the UK.
