Yahoo Finance City Comment: BT and Virgin Media O2 put the squeeze on Vodafone
BT and Virgin Media O2 are going gangbusters - but what about Vodafone?
Both BT and Virgin are busy building net generation fibre networks across the UK. Both have bought mobile operators in recent years to complement fixed line networks - in BT’s case EE and O2 for Virgin.
Virgin Media’s O2 deal closed only four months ago but is already bearing early fruit. The company says it has returned to revenue growth, thanks in part to new package deal Volt (you may have seen the ads).
The pitch to customers is this: get both broadband and mobile data from Virgin Media O2 and they’ll double the speed of both at no extra charge.
BT also entices customers to double up with 10% off broadband deals for EE customers.
This strategy of packaging fixed and mobile has worked wonderfully for operators elsewhere in Europe. As the internet becomes more ubiquitous, distinctions breakdown. Broadband, 5G, WiFi - whatever. So long as it’s fast and reliable.
BT and Virgin can offer cheap deals because they own the pipes. Not so for Vodafone. The company offers package deals but through partnership with fibre operators, including piggybacking on BT’s Opeanreach infrastructure.
Without a broadband business, it has less of the pricing power of rivals. Vodafone’s monthly discount of just £3 on package deals that start at £68 is hardly going to set the world alight. Over time Vodafone could face a painful squeeze.
Could it be time to buy? Vodafone already has a partnership with City Fibre, the third biggest player in the market. City Fibre’s network this week reached 1 million homes and it is aiming for 8 million by 2025 - behind BT and Virgin Media O2, but it’s a start.
Perhaps it’s time for Nick Read to get the cheque book out.
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