As we move into 2015 the convergence of laptops, mobiles and TV screens has become an ever increasing trend and now it is the turn of the fragmented UK communications industry.
It has been recently revealed that BT is considering buying the O2 mobile network, and is in the early-stages of talks with the UK’s largest mobile network, EE. This comes 13 years after BT themselves sold the company that became O2, and marks a dramatic change in policy, which could spark a string of mergers in the telecoms and media sectors. In this respect the UK is actually slightly behind the rest of Europe, as the concept of a communication supergroups offering everything from Premier League football to internet services, is already established on the continent.
“The horse has bolted out of the stable door,” says Deutsche Bank’s telecoms analyst Robert Grindle. “The market now is going down a convergent route. The competitive forces have been unleashed and things are going to have to shake out.”
This convergence will effect consumers in several ways. Not everyone will want all the services a provider can offer bundled together. However, it is likely that the prices of the services will drop as a result of the bundling and competition. Analysts are forecasting a price drop: BT currently give away its BT Sport channels to customers that take its broadband and could soon be adding discounted mobile connections to that package.
BT’s move back into mobile could also help those waiting for a faster internet connection as competitors retaliate. It is possible their main rivals such as Vodafone and TalkTalk may choose to hit back where BT is strongest, by stepping up investment in their own superfast fibre networks.
All the main mobile and media companies are now considering their options, with so many different providers encroaching on each others lines of business, competition will be fierce and this is likely to benefit the consumer.
Vodafone appears determined to remain competitive in the bundling arms race, it has bought several broadband and TV operators in Europe, and is laying fibre-optic cables in Spain, Portugal and Ireland. In the UK, they’re offering their 20 million customers broadband and a TV set-top box if they want one next spring. Vodafone have said that if BT aquire O2 they’re going to move more into consumer broadband.
For broadband, Vodafone will use the fibre it acquired when it bought the UK network built by Cable & Wireless
, which so far has been reserved for business customers. This only covers half of telephone exchanges. To reach homes, it may lay its own fibre, or rent them wholesale from BT. For TV, Vodafone is thought likely to join forces with Sky, distributing the satellite broadcaster’s Now set-top box.
Could this lead to a full-blown corporate wedding? Rupert Murdoch would have to part with his 39% stake in Sky. Analysts at Espirito Santo say Vodafone, currently valued at £60bn, would need £20bn to take full control – a 30% premium to Sky’s current valuation.
The UK Telecoms Industry at a glance:
UK customers: 9.8 million for home broadband and phone
Products: TV, broadband, land line
UK customers: 11.5 million
Products: TV, broadband, land line
UK customers: 4.9 million
Products: TV, broadband, land line, mobile
UK customers: 4.2 million
Products: TV, broadband, landline, mobile
UK customers: 25 million
Products: TV, broadband, mobile
UK customers: 22 million
UK customers: 20 million
Products: mobile, soon to launch broadband and TV
UK customers: 8 million