Could Vodafone Group plc Challenge BT Group plc?

Surveying the telecoms battleground between Vodafone Group plc (LON: VOD) and BT Group plc (LON: BT.A).

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Last year Vodafone (LSE: VOD) (NASDAQ: VOD.US) sealed the biggest deal in a decade when it sold off its stake in US mobile network Verizon Wireless for £79 billion.

Vodafone’s shares are up 50% since the beginning of 2013 – riding a 12 year high of 238p – as investors await the Verizon windfall. The return is set to be enormous, with £54bn on its way to Vodafone investors, which is set to come in the form of a special payout equating to 112p.

More gains to come

Since the sale of Verizon, Vodafone has been vulnerable to a takeover with US telecoms giant AT&T hovering.

The American company has been internally laying down the groundwork for a takeover bid for some time. Speculation is that the price could be 280p a share and a counter bid from Japan’s Softbank could see that price hike further.

Other possibilities

Such a bid may not happen however. Vodafone and BSkyB are reportedly in talks to reach a deal where they would collaborate on a high-speed broadband service.

Vodafone would then become a more difficult proposition for a predator such as AT&T to sink its teeth into. More importantly, if you’re a BT (LSE: BT-A) (NYSE: BT.US) shareholder, this would present a strong challenge to BT’s dominance.

Discussion has taken place that Vodafone and Sky have discussed striking a deal over Sky’s sports and movie channels. A similar service to BT’s TV service, coupled with reliable customer service, could mean BT has a serious rival to its power in the broadband market.

Customer service isn’t something BT enjoys a great reputation for. It recently had to apologise to customers after receiving a series of complaints over its BT TV offering. BT’s £1 billion investment in sport was a colossal bet that could hurt earnings, but this doesn’t mean there won’t be tangible benefits – to marketing for instance.

One thing that’s clear is they’re going have to be ready for a fight to stay on top.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Mark doesn't own shares in any company mentioned.

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