When BT (LSE: BT-A) (NYSE: BT.US) revealed that it was going to enter the mobile phone market, many analysts didn’t take the company seriously. This is because BT has tried to penetrate the mobile market several times before and each time the company’s plans have ended in disaster.
However, BT’s recent attempt to win over mobile customers appears to be working and Vodafone (LSE: VOD) (NASDAQ: VOD.US) should be worried.
BT’s foray into the mobile arena comes in the form of BT One Phone, a unified communications solution. In English, this means that the phone has all the features of an office phone on a mobile handset, with all fixed, mobile and extension calls routed to the user’s handset.
Of course, this set-up is aimed at the business market but that has not stopped it winning over customers straight away. Indeed, initial customer feedback is encouraging with many customers extending their initial contracts and recommending the service to peers.
What’s more, the solution promises to save customers at least 20% on their communication costs, although some customers have reported a 50% reduction in costs.
Initially, the offering is only being rolled out to small and medium sized enterprises, as a trial market. Eventually, BT plans to roll the phone out to all of its BT business customers, that’s a potential market of 900,000 businesses.
A major threat
At present, BT’s One Phone is only targeted at the business market. However, the company has plans to roll out a traditional mobile offering across the country in the near future — a threat to Vodafone.
You see, Vodafone is spending billions on network upgrades as the company tries to cope with users’ ever-increasing demand for mobile data. The company is spending £19bn across Europe to increase its 4G network coverage. It is hoped that this hefty capital outlay will convert customers to Vodafone’s network.
BT plans to do things differently. Indeed, the company has spent years improving its mobile internet coverage with Wi-Fi hotspots, and the company unexpectedly acquired a 4G mobile spectrum last year.
As a result, the company is able to offer its customers 4G and LTE mobile connectivity at no extra cost for customers by using its existing network. Unfortunately, free 4G coverage is something Vodafone cannot compete with, giving BT a strong competitive advantage over the international mobile giant.
A move into the mobile market is the latest drive by BT to reduce the company’s exposure and dependence upon traditional fixed line telecommunications. If the company can pull off its mobile ambitions, like it did with its move into pay-tv, the future could be bright for BT.
Still, there’s no denying that BT has made some mistakes in the past. While everything appears to be going to plan now, the company could find itself in trouble further down the road.
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