An increasingly big player in the fixed broadband market, Vodafone could join BT’s push to deliver full fibre to 25 million premises.
Last week, the BT Group announced that Openreach’s FTTP rollout, which originally targeted 20 million connections by the mid to late 2020s, will now strive to reach 25 premises by December 2026. The new ambition has raised the bill for new installations by £3 billion to £15 billion.
While BT says it has the resources to fund the expansion itself, even after accounting for investment in EE’s 5G network (and the stripping of Huawei equipment from its mobile masts), its pension commitments and promise to reinstate its dividend next year. However, BT suggested that it “could deliver further shareholder value by funding the additional 5m premises through a joint venture with external parties.”
Vodafone has now expressed interest in being one of those third parties—or a partner in another network’s full-fibre build. Chief executive Nick Read told The Telegraph: “We are actively engaged with Openreach to understand their plans and what they are looking at, but we will explore with many players—not just BT.”
Other players could be a range of smaller alternative networks, which themselves are forecast to deliver FTTP to nearly 16 million premises by the end of 2025.
Vodafone currently sells broadband tariffs over both Openreach and CityFibre’s full-fibre networks. It previously had an exclusivity deal with independent full-fibre network CityFibre but allowed the deal to be restructured in 2020 to allow more vendors on board and accelerate CityFibre’s build.
However, the diversifying company may want access to its own FTTP network too in order to compete with both its mobile rivals and other ISPs.
Vodafone lost a chance for access to Virgin Media’s gigabit-capable cable network when takeover talks with Virgin parent Liberty Global foundered. Virgin Media has since partnered with O2, in a blockbuster £31 billion merger recently greenlit by the Competition and Markets Authority (CMA). Full-fibre infrastructure undergirds 5G networks.
Furthermore, Vodafone has amassed a healthy base of fixed-line broadband subscribers alongside its mobile business.
Its latest quarterly results, Vodafone reported 911,000 total broadband subscribers, signing up 35,000 new customers in three months despite poor customer service reviews and high volumes of complaints. Meanwhile, its mobile customer base shrank to 17 million.
Vodafone also announced an ambitious investment plan, which will see it spend heavily on new technologies such as 5G, devices connected to the ‘internet of things’ and broadband networks. Chief executive Read said the company needs to “spend more to grow more.”
However, jittery investors sent the FTSE 100-listed company’s shares tumbling 8.9% on Monday following the announcement, wiping £3.5 billion off Vodafone's value. The slide continued during the week, leaving Vodafone shares down 10.3% since the start of the week, despite the company’s results showing profits up £684 million to £3.8 billion in the year ending in March.
However, revenue was down 2.6% to £37.7 billion, which Vodafone attributed to reduced income from mobile roaming and handset sales as a result of the coronavirus pandemic.
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