Will BT Group plc Outflank Vodafone Group plc?

BT Group plc (LON:BT.A) could encroach on Vodafone Group plc (LON:VOD).

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If you know anything about Vodafone (LSE: VOD) (NASDAQ: VOD.US), you probably know that it sees the future in offering customers ‘quad play’ packages, combining mobile and fixed-line telecoms together with television and broadband.

Vodafone has made much of this strategy, launching ‘Project Spring’ to invest £7bn in its European network, and buying cable TV operators in Germany and Spain where consumers typically buy their communications and entertainment as a package. The company should know all about quad-play packages from its former associate Verizon Communications, which popularised the concept in the US.

Not our national game

Surprisingly, we Brits don’t currently go in much for quad play. Less than one in ten households has it, with Virgin Media the main provider. The stranglehold of former state-owned monopoly BT (LSE: BT-A) (NYSE: BT.US) over the landline network possibly explains that.

BTBut it all could be about to change. BT is poised to revive its mobile phone offering, and plans to offer quad-play contracts towards the end of this year, starting with the enterprise segment first. It bought fast 4G spectrum earlier this year and has partnered with EE, the joint-venture between Deutsche Telecom and Orange, to provide mobile services.

These shifting alliances promise an interesting time in the European telecoms sector. BT’s insipid mobile services had previously been supplied by Vodafone, but BT put the contract out to tender when Vodafone bought Cable and Wireless to bolster its fixed-line infrastructure. Vodafone has been encroaching on BT’s core business, and now BT looks ready to retaliate. Quad play is the ground where both companies meet head-on.

Not sporting?

BT has form in disrupting sectors. Its push into pay-TV was spearheaded by a shock £740m bid to screen Premier League football, followed by £900m for the European Champions League. That was a direct challenge to the dominance of BSkyB, and clear evidence of its willingness to make big investments to position itself in the changing industry landscape.

There are two themes being played out in the sector: the extent to which services are bundled, and the extent to which companies combine content with pure telecoms. It looks like BT aims to be dominant across the board.

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.

Tony owns shares in Vodafone but no other shares mentioned in this article. The Motley Fool has recommended shares in BSkyB.

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