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

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. 

Sit back and relax

So, with the war for mobile customers heating up, Vodafone may not be your best bet on the telecommunications sector. However, telecommunications stocks are well known for their hefty dividend payouts and a portfolio of stocks that pay a healthy dividend can be a great way to earn a passive income.

Fortunately, there are plenty of other opportunities out there and the Motley Fool's top analysts have put together this free report entitled, "The Motley Fools Guide To Investing In Telecoms" to help you discover the sector's best opportunities.

The report is completely free, so click here to get your copy while it's available.

Rupert does not own any share mentioned within this article.