Vodafone, O2 and EE warily eye UK quad-play options

Mobile operators in the UK are in the process of determining how far they will go in offering bundles that incorporate mobile, fixed voice, fixed broadband and TV services as they prepare for increased competition from fixed players.

Vodafone CEO Vittorio Colao

Vodafone CEO, Vittorio Colao

BT and TalkTalk are both planning to enter the UK mobile market with so-called "quad-play" strategies that will see the traditional fixed-line players add mobile services to their mix of voice, broadband and TV services. Both companies plan to build small cell networks for home-based mobile usage, and rent wholesale capacity on existing mobile networks for access on the go.

Such strategies have left Vodafone UK, O2 UK and EE pondering their next moves. Vodafone, which is a leading proponent of quad-play or fixed-mobile convergence in its markets across Europe, has already revealed plans to step up its own multi-play proposition by launching fixed broadband services in the first half of 2015, using a mix of its own fibre broadband network and wholesale lines supplied by BT.

However, the company is clearly also feeling under pressure to adopt strategies merely in an effort to keep pace with competitors such as BT: Vodafone CEO Vittorio Colao warned that the company may be forced to bid for TV rights, for example, even though he doubts the value of doing so, according to the Financial Times.

Speaking at a Morgan Stanley conference in Barcelona this week, Colao also said quad-play bundles could have an adverse effect on operators' profits if they succumb to the temptation to use the bundles to cut prices. That has been the case in Spain, for example, while in Germany Colao noted there has been less of a markdown, Bloomberg reported.

O2 UK appears to be adopting more of a watching brief, and indeed parent company Telefónica has not ruled out selling its UK operation if the market becomes increasingly convergent.

"If the market goes convergent then we will need to evaluate our options," Telefónica's chief operating officer, Jose Maria Alvarez-Pallete, told the Morgan Stanley conference, Reuters reported.

Meanwhile O2 UK CEO Ronan Dunne has apparently derided plans by BT and Vodafone UK to offer quad-play bundles, saying there is little appetite for such services among UK consumers.

"Do I see a massive lurch in the market to a converged offering? I don't see any evidence of an appetite for that," Dunne said at a media briefing, the Evening Standard reported.

As things stand, both Virgin Media and TalkTalk offer a full quad-play offering on the UK market.

Dunne conceded that BT would have an impact, however: "Don't mistake this for complacency or arrogance," he said.

EE, which already sells mobile and fixed broadband services in the UK, also recently unveiled a new home TV service called EE TV. However, the company's parent companies, Orange and Deutsche Telekom, are more than aware of the challenges that lie ahead: speaking at the Morgan Stanley conference, Orange CEO Stephane Richard noted that EE also needed to be in this convergent market in the future, reported Dow Jones Newswires.

"We have some strategic issues ahead of us," Richard added. He also said the 50:50 ownership structure with its German partner was not sustainable in the long term and another solution would have to be found for EE. All options are currently on the table, including an initial public offering or a merger.

Little appears to have been said on the subject so far by Three UK, the other major mobile network operator in the market: the Three group has not traditionally pursued a convergence strategy, instead focusing on "all-you-can-eat" mobile data and other high-volume data offerings.

For more:
- see this Financial Times article (sub. req.)
- see this Bloomberg article
- see this Reuters article
- see this separate Reuters article
- see this separate Financial Times article
- see this Evening Standard article
- see this Dow Jones Newswires article

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