Vodafone (LSE: VOD) is making waves across Europe as the company redesigns the European telecommunications market.
Along with rolling out the largest 4G LTE capable network across mainland Europe, the company is now looking to shake up the UK’s telecoms market. Vodafone plans to do this by taking on BT, in a market that the British stalwart has dominated for many years.
Broadband push
Vodafone is set to reveal plans within the next few weeks for a push into the UK consumer broadband market. Vodafone is retaliating as rivals BT and Sky, make an assault on Vodafone’s mobile market share, by signing deals to expand their mobile services.
In particular, Vodafone is planning to launch home broadband this spring, before adding a cloud-based TV service later in the year. These new services, along with Vodafone’s existing mobile offering will then be bundled together and offered to customers as a “simplified” multimedia bundle.
As part of this drive to improve its customer offering, Vodafone is planning to connect its existing fibre broadband network to about 1,000 of BT’s larger exchanges. Enabling the company to offer high-speed broadband to most of the UK.
Welcome development
This news is a welcome development for Vodafone’s shareholders. You see, Vodafone has been struggling in the UK for some time. And the recent spate of mergers in the sector is only going to make it harder for Vodafone to grow sales over the long term.
However, Vodafone has an advantage over other competitors in the broadband market because it acquired a large national fibre network with the purchase of Cable & Wireless Worldwide in 2011. What’s more, the company’s fibre network uses the most up to date equipment, allowing Vodafone to offer higher network speeds than the traditional local exchanges. This gives the international group an edge over smaller peers like Sky and TalkTalk.
Additionally, Vodafone’s proposed cloud-based TV package is an innovation that puts the company ahead of its peers. Indeed, cloud based TV service will have lower set-up costs than the traditional cable, or satellite based television networks currently on offer.
Good news for investors
Overall, Vodafone’s plan to dominate the UK multimedia market looks like it could work out for the company. A low-cost cloud based TV service and high-speed broadband network will give the company an edge over its peers and should help the group win over customers.
Still, Vodafone’s key selling point for investors is the company’s international exposure and market-leading dividend yield. Two traits many of the company’s UK peers do not have.
As a result, analysts believe that Vodafone’s earnings are set to expand by 23% during 2017, as the company starts to benefit from its European infrastructure redevelopment and growth here the UK.