Vodafone UK has launched a fixed-line broadband service in advance of BT's acquisition of mobile rival EE. (See Eurobites: Vodafone UK Launches Fixed Broadband, Voice.)
The formerly mobile-only player has been fretting that a tie-up between BT Group plc (NYSE: BT; London: BTA) and EE , the UK's largest fixed and mobile players, respectively, will be able to lure customers to "quad-play" offerings that include fixed voice, broadband, TV and mobile services, and its broadband launch could help to mitigate that risk.
Competition authorities are scrutinizing the planned merger between BT and EE, but Gavin Patterson, BT's CEO, is hopeful of completing the takeover early next year. (See BT Locks Down £12.5B EE Takeover Deal and EE Makes IoT Push Before Takeover by BT.)
Vodafone UK is also planning to launch a TV offering later this year, with CEO Vittorio Colao recently indicating it may look to purchase exclusive content so that it can better compete against pay-TV players such as BT and Sky. (See Vodafone May Buy Content to Fight BT, Telefónica and Eurobites: Vodafone Plans Triple-Play in UK.)
The launch of the broadband service comes as Vodafone holds talks with cable giant Liberty Global Inc. (Nasdaq: LBTY) about a possible exchange of assets, which could see Vodafone acquire Liberty's Virgin Media Inc. (Nasdaq: VMED) business in the UK while exiting the German market. (See Vodafone in Asset-Swap Talks With Liberty and Vodafone Could Buy Virgin Media, Quit Germany, Says Analyst.)
In the meantime, Vodafone appears to be heavily dependent on a wholesale agreement with BT to support its new broadband offering.
Although it acquired an extensive fixed-line business in the UK through its £1 billion ($1.55 billion) takeover of Cable & Wireless Worldwide plc (London: CW) in 2012, Vodafone has to rely on BT's local exchanges to connect to customer premises.
A spokesperson for the operator told Light Reading that Vodafone has now connected the Cable & Wireless fiber network to about 1,000 of BT's exchanges, allowing it to serve nearly 20 million premises across the country.
The plan is to reach more than 22 million premises in the summer.
"BT Openreach will be used for the last mile offering ADSL and VDSL," said the spokesperson in reference to BT's infrastructure business, which provides connectivity services for other operators.
The arrangement is far from ideal given BT's growing power in the fixed and mobile markets. The former state-owned monopoly recently launched a mobile service through a partnership with EE, and Colao has been urging UK regulatory authorities to make BT spin off the Openreach business as an entirely separate company. (See BT Threatens Price War With New 4G Offer.)
Such a structural separation would stop BT from being able to "squeeze" its broadband rivals by setting wholesale rates too high or retail fees too low, claim companies including TalkTalk , the UK's fourth-biggest broadband provider.
Were Vodafone to acquire Virgin Media, it would also be able to offer much higher-speed services than BT.
The Vodafone Connect offering it has just launched tops out at 76Mbit/s -- the same, naturally, as BT's highest-speed service -- but Virgin's DOCSIS 3.0 cable infrastructure can support connections that are twice as fast.
One drawback of the Virgin network is its relatively limited footprint, which covers about one half of the UK population, but the cable operator is working on an upgrade that will extend services to about three quarters of UK premises by 2020. (See Virgin Media Plots £3B Invasion of BT Turf.)
Vodafone is currently offering the Connect service only to existing mobile customers but intends to make it available to other consumers later this year.
— Iain Morris, , News Editor, Light Reading