BT is moving back into mobile. Panic stations?
Kunal discusses the implactions the move could have
On Monday Spanish newspapers reported that BT were in talks with Telefonica over a potential takeover of O2. It later emerged that BT are also discussing the purchase of EE from French company Orange S.A. and German company Deutsche Telekom. But what would this mean for us? Should we be worried, or excited?
The move from BT shows clear intent to enter the mobile market. Since spinning off O2 in 2001 (then called BT Cellnet), BT has often regretted not being in the mobile market. They have made attempts to slowly move back in through deals with O2 and EE over the past couple of years.
With this deal (whoever it may come from) BT will suddenly have a market share of more than 29% (EE actually has 33% at the moment), and a platform from which to launch a new ‘Quad-Play’ service. Quad-Play is a package currently on sale in Europe that offers Internet, television, landline and mobile in one bundle. It has proved to be popular in Europe but is largely unproven in the United Kingdom. Virgin Media attempted it, but with limited success.
So, what does this mean for us? Should we be worried about rising prices as a result? At the moment analysts are split, with some saying that prices will increase, whilst some believe that it will, in fact, decrease. Early indications would suggest that if Quad-Play is something that you are interested in then this is great news, as bundles in Europe have been sold at significant discounts.
The other side of the coin, though, is BT’s costs. Having spent more than £2.5 billion to upgrade its fibre optic networks and £2 billion on television rights in sport, BT have a lot of money to make up. The estimated £10 billion that will be needed to complete the takeover will not help matters either. When BT last spent this much, our line rental costs went up by a significant amount. Expect similar things to happen if you choose not to go with Quad-Play.
The other intriguing point that stems from this is whether other companies will follow suit. Vodafone have already been touted to form a partnership with BSkyB if BT’s move proves successful, and it is also thought that TalkTalk will be looking for a partner.
One thing is for sure though – many will watch BT’s next moves with fascination and intrigue.
And with just a hint of anxiety.
