Could Vodafone Group plc Challenge BT Group plc?

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.

The full picture

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