Mobile services

Vodafone May Buy Content to Fight BT, Telefónica

Vodafone is considering whether to buy content rights as a way of differentiating its services from those of rivals such as BT and Telefónica, CEO Vittorio Colao has told investors.

Answering questions from analysts during a presentation of the operator's full-year results, Colao said a decision to procure content directly would hinge largely on the regulatory environment in specific markets.

"It's very early for us but in some markets we are starting to think about it," he said. "The Spanish regulator has strangely said that 50% of TV channels should be made available at reasonable prices without saying what is reasonable… BT is buying content and not really giving it to everybody. We will have to see if this becomes a delicate key success factor for new customers."

Colao accused Spain's Telefónica of "closing up the content fort" and being the most obstructive incumbent that Vodafone Group plc (NYSE: VOD) faces in the European region.

The remarks suggest Spain's pay-TV sector could become a battleground between the operators following Telefónica's acquisition of Canal+ earlier this month -- a move that has reportedly left the telecom incumbent with an 85% share of the local pay-TV market.

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The Vodafone boss also took predictable aim at the proposed merger between BT Group plc (NYSE: BT; London: BTA) and EE in the UK, urging regulators to strip the combined entity of spectrum holdings and break up a network-sharing agreement between EE and Three UK , the UK's smallest mobile network operator. (See BT Locks Down £12.5B EE Takeover Deal.)

"There have to be remedies -- otherwise it's better if the deal does not go through," he said.

Ideally, Colao would also like Ofcom to carve up BT, turning its Openreach infrastructure division into an entirely separate business.

Earlier this week, a spokesperson for Ofcom told Light Reading the regulator would not rule out such a "structural separation" of BT during a strategic review of the market that is currently under way, although such a dramatic move seems unlikely. (See Ofcom Does Not Rule Out BT Carve-Up.)

Discussing full-year results, Vodafone heralded a return to organic service revenue growth in the January-to-March quarter for the first time since 2012, claiming its strategy of bundling data services with content from partnership agreements was starting to pay off.

In the UK, Vodafone's domestic market, customers on 4G tariffs can access services from satellite TV player Sky and Spotify , an online music provider, and Vodafone plans to launch its own TV service by the end of the year, following the introduction of a broadband offer in the summer. (See Eurobites: Vodafone Plans Triple-Play in UK.)

Colao is trying to reinvent Vodafone as a "unified" communications provider able to provide the full "quad-play" of fixed voice, mobile, broadband and TV services to its customers.

The operator hit the acquisition trail in Europe after agreeing to sell its stake in Verizon Wireless , a US mobile operator, in 2013, snapping up fixed-line businesses in Germany and Spain in anticipation of surging interest in converged services. (See Vodafone Agrees to $130B Verizon Stake Sale, Europe's Fiber Sell-Off and ONO Says Yes to Vodafone.)

That takeover activity fueled a 10.1% increase in sales in the year ending March, to £42.2 billion ($65.3 billion), with EBITDA rising by 7.5%, to £11.9 billion ($18.4 billion).

Next page: European outlook brightens

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