Vodafone braced for BT attack on mobile market

Vodafone has admitted it will delay a decision on whether to introduce its own home broadband and television services until BT launches its attack on the consumer mobile market.

The defensive posture was set out by Jeroen Hoencamp, chief executive of the telecoms giant’s UK arm, who is targeting a return to revenue and profits growth for the shrinking business within 18 months.

BT is casting a shadow over the recovery plan by aiming its enormous financial firepower at Vodafone’s stronghold. The company has said it will re-enter the consumer mobile market early next year and is widely expected to significantly undercut rivals with deals designed to encourage households to take a package of broadband, television, mobile and fixed line phone services.

The move will put BT in more direct competition with Vodafone and could trigger price cuts across the industry that would threaten Mr Hoencamp’s turnaround. Vodafone’s 4G packages are already more expensive than its rivals’ and it has a lower share of the market for such faster mobile internet access compared with its share of slower 2G and 3G subscribers.

The Dutchman took the helm of Vodafone UK a year ago and embarked on a programme of cost-cutting, including the review of third-party retailer relationships that led the operator to pull out of Phones 4U this month

He said he was waiting for more details of the BT plan.

Mr Hoencamp said at an event in London: “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 said the limited success that the cable provider Virgin Media has had selling its customers a 'quad-play’ of services, including Virgin Mobile, suggested British consumers were well-served by existing competition in the mobile market.

Vodafone is pursuing quad-play strategies in its other major territories, Germany, Spain and Italy. There have been repeated rumours that it will enter the British broadband and pay-TV markets to counter the BT threat, either via a tie-up with BSkyB or a major acquisition.

Vittorio Colao, Vodafone’s group chief executive, also fuelled the speculation this month by saying he would consider an acquisition of Liberty Global, the owner of Virgin Media, “for the right price”

Mr Hoencamp said there was no urgent need to act, however.

He said: “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.

“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.”

In spite of his quad-play scepticism, Mr Hoencamp highlighted Vodafone’s £1bn acquisition of the Cable & Wireless fibre optic network in 2012 as a useful weapon in a battle with BT.

Vodafone and the other operators are also under pressure from the Government, which wants them to improve mobile coverage in rural areas.

Mr Hoencamp said he “shares that ambition” but disagreed with Government proposals and called for alternatives such as opening up public land for new masts, cutting planning red tape and backing from competition regulators to allow more mast to be shared between networks.