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This Deal Could Catapult Vodafone Group plc’s Earnings Higher

According to some City rumours, Vodafone (LSE: VOD) (NASDAQ: VOD.US) is in talks with video-streaming service Netflix to allow the company’s pay-monthly customers to stream films and television shows, complementing Vodafone’s existing media offering.

Indeed, Vodafone already offers pay-monthly customers a choice of free Spotify access, or use of the Sky Sports Mobile app, although both of which are only free for the first six months. It is thought that Vodafone’s customers would only be able to access Netflix content for a short period as well. 

vodafoneCustomers and Vodafone will benefit

Still, a deal with Netflix would be great news for both Vodafone and the company’s customers. Specifically, a deal would transform Vodafone into a one-stop shop for customers who want to access applications, entertainment and files on mobile connections.

What’s more, as customers watch Netflix content on their mobile devices it’s likely that they will demand more data from Vodafone’s network.

Data contracts are a highly lucrative for Vodafone and the company is seeking to increase the number of customers who sign up for hefty data contacts to offset declining voice and text revenues. It is likely that a deal with Netflix will boost the demand for data contracts. 

Further, an agreement with Netflix would complement Vodafone’s recent collection of European acquisitions nicely. 

Could be part of something bigger

However, this potential agreement with Netflix could be part of a bigger plan. You see, there has been much talk recently of a merger between Vodafone and one of the UK’s larger pay-tv companies, specifically, BT or BSkyB.

A deal of this kind would make Vodafone one of the largest pay-tv providers in Europe with customers across the continent.

And this is why a deal with Netflix appears to be part Vodafone’s long-term growth plan as the company would be able to offer subscribers Netflix continent as standard across the newly acquired pat-tv network. Additionally, Netflix would be able to benefit as the company would be able to drive growth off Vodafone’s pay-tv customer base. 

Foolish summary

All in all then, a deal between Vodafone and Netflix would be great news for both companies. Moreover, it is likely that Vodafone will report a rise in customer numbers as a result. 

Nevertheless, a deal between Vodafone and Netflix is likely to draw customers but it's questionable if the deal will enable Vodafone to return to growth.

Indeed, with Vodafone's market share under attack from all sides, the company is going to have to work much harder than it has done in the past to drive growth.

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Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in BSkyB.