Vodafone’s announcement that it’s in discussions with Virgin Media–owner Liberty Global about a ‘possible exchange of selected assets’ is the final, inevitable move in the consolidation of mobile networks and TV companies.
While Vodafone says it won’t be merging with Liberty, its management–speak press release points towards it formalising a relationship with Virgin Media whereby it will start selling so–called quad–play contracts.
This means it will offer mobile, landline, TV and broadband services in one package.
Virgin itself already offers such deals using its own mobile network. But Vodafone has been left out in the cold thanks to its major rivals either teaming up or swallowing each other in the past year.
Three and O2 are set to become the largest network in the UK once the former’s takeover of the latter is confirmed.
Meanwhile, BT’s growing domination shows no sign of abating as it takes over EE and broadens its pay TV services.
With Sky launching its own network too, Vodafone has been left standing alone, desperate to attract new business in order to return to its position as a dominant force in the market.
A deal with Virgin Media makes a lot of sense. Its pay TV service is solid, its fibre broadband impressive.
Plus, it really is the only option left open to Vodafone, short of trying to create its own product, something which would take years and not be guaranteed to succeed.
While talks are in early stages, it’s hard to know exactly how consumers will be affected.
The worry has to be that with fewer players on the scene, prices will eventually go up. Our studies indicate that's a very real fear among consumers.
But on the flip side, a new wave of competition between newly minted companies and those with a wider remit could mean better all-round deals.
Quad–play is certainly the big thing at the moment and the chance to save by buying in bulk is always tempting.
Neither Vodafone or Liberty have put a timeline on when a deal will be struck, at least not publicly.
But if it wants to succeed, it will have to move quickly. Regulators are scrutinising the BT/EE and Three/O2 deals now and Sky isn’t hanging about with its offerings either.
A deal by the end of the year is essential if Vodafone doesn’t want to become a footnote in the fight for phone and home entertainment supremacy.