Vodafone to launch broadband and television services

Vodafone will enter Britain’s crowded home broadband and pay-TV market in spring next year as a defence against BT’s impending attack on the consumer mobile market, it announced on Tuesday.

It means Vodafone will join BT, BSkyB, EE, TalkTalk and Virgin Media among the ranks of telecoms companies offering a bundle of communications services. Mobile operators are braced for BT’s attack, which is expected by analysts to include significantly undercutting them.

Vittorio Colao, chief executive of Vodafone, said the company would use its own 21,000km fibre optic ‘backbone’ network, acquired for £1bn with Cable & Wireless two years ago, to help reduce its own costs to compete in broadband and pay-TV. Like all its rivals, except Virgin Media, Vodafone will rely on wholesale access to BT’s national network for the final link into homes.

Mr Colao suggested that eventually it could join forces with BSkyB and TalkTalk to invest in its own fibre optic infrastructure and bypass BT completely.

It will be Vodafone’s second attempt to sell broadband to British households on top of mobile subscriptions, following an aborted effort in 2006.

More recently, in European markets such as Germany and Spain, it has made more concerted efforts and invested heavily to gain a foothold in fixed-line market. The moves into more profitable broadband and pay-TV sectors have partly been driven by tough competition and prices cuts imposed by regulators on mobile operators.

Mr Colao said the move into broadband and television in Britain was mostly defensive and designed to ensure that if consumers show a bigger appetite for bundles of services, Vodafone will be able to compete.

Vodafone did not reveal pricing or other commercial details of its forthcoming fixed-line products. Mr Colao said that it expects to launch after BT re-enters the mobile market and that “of course, if they come hard into mobile we will come hard into broadband”.

Stock market rumours have repeatedly linked Vodafone with a potential takeover of TalkTalk, the only independent large broadband provider left in play. The company made major acquisitions in Germany and Spain to build its fixed-line business.

Mr Colao said a multibillion-pound takeover of TalkTalk was not necessary but that “we look at things, that’s our job”.

He also said it was too soon for Vodafone to compete for major UK content rights such as the Premier League, which is due on the auction block in the New Year.

The announcements came alongside Vodafone’s first half results. They showed a significant improvement that sent the shares climbing 5.4pc to second on the FTSE 100 leaderboard yesterday.

The group reported a 2.8pc decline in organic service revenue, a key measure of the like-for-like performance of its core business, to £19.1bn. That compares with a slide of 4.2pc last year. The company has been hit hard in recent years by regulation of wholesale and roaming charges, and by the recession in Europe.

On the basis of the slowing decline, Vodafone tweaked its full-year Ebitda guidance to between £11.6bn and £11.9bn, the upper end of previous forecasts.

Mr Colao said: “We have made encouraging progress during the quarter. There is growing evidence in a number of our European markets, supported by improvements in our commercial executive and very strong demand for data.”

He said the company was beginning to enjoy benefits of its £19bn ‘Project Spring’ investment in improving its network coverage and quality. o