Should Vodafone Group plc Be Worried About BT Group plc’s Mobile Ambitions?

BT Group plc (LON: BT.A) has set its sights on the mobile phone market, and Vodafone Group plc (LON: VOD) should be worried.

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Having already shaken up the pay-tv market, BT Group (LSE: BT-A) (NYSE: BT.US) has now set its sights on the UK’s mobile telecoms market — and peer Vodafone (LSE: VOD) (NASDAQ: VOD.US) should be worried.

Failed attempts

BT has actually made several attempts to crack the mobile market before with varied success. Indeed, the company was involved in the launch of one of the UK’s first mobile networks during 1986. This mobile business, which is now known as BT Mobile, is still sold to some of BT’s corporate customers bundled with other services.

BTBT’s other attempts to crack the mobile market include the launch of BT Fusion, a network based on Bluetooth technology, which cut the cost of calls significantly. The company also released its own mobile phone back during 2008, called BT ToGo. Both of these attempts to crack the market proved to be unpopular with customers.  

The rest of the world has now caught up

Still, BT’s previous attempts to break into the mobile market have all been based around one thing, the use of mobile internet technology to boost performance.

In the past, BT’s high-speed broadband network has been underdeveloped and customers have preferred cheap voice calls over data allowances. However, now the telecommunications market has changed and customers are demanding more and more internet data. In addition, with the rise of free messaging apps like WhatsApp, voice and text services are no longer an attractive market for mobile operators. 

Further, BT has spent billions during the past few years improving its mobile internet coverage with WiFi hotspots, and the company unexpectedly acquired a 4G mobile spectrum last year.

As a result, I believed that BT will be able to leverage its expansive broadband network to offer customers extensive data packages, which will attractive to consumers who require large mobile data allowances. 

Vodafone is in trouble

Meanwhile, Vodafone is spending billions on network upgrades as the company tries to cope with users’ ever-increasing demand for mobile data.

vodafoneUnfortunately, for Vodafone, at the same time the company is also struggling with falling voice and text messaging revenues, as users favour free internet messaging services.

Nevertheless, Vodafone has been using its cash from the sale of the company’s share in joint venture, Verizon Wireless to acquire European peers as an attempt to diversify and boost growth. That said, some analysts have voiced the opinion that Vodafone is overpaying for these acquisitions and better returns could be found elsewhere.

Foolish summary

All in all, it would appear that BT has the infrastructure in place that would allow the company to build a mobile data focused network within the UK, which could be attractive to customers.

It would appear that Vodafone should be worried about BT’s ambitions. 

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.

Rupert does not own any share mentioned within this article. 

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