Resurgent BT comes back to haunt old rival Vodafone

BT's move to buy mobile operator EE is expected to put the former state-owned telecoms giant back in pole position as fixed line and mobile services converge, forcing rivals such as Vodafone to make costly moves of their own to keep up.

BT on Monday entered into exclusive talks with Orange and Deutsche Telekom, the owners of EE, after playing them off for weeks against rival suitor, Telefónica. This showed the power the 168-year-old fixed-line operator now wields with its vision of providing a unified fixed and mobile broadband internet service.

With companies looking to offer bundles of mobile and fixed-line broadband, telephony and pay-TV services from one provider, BT is seen as best placed to prosper with its planned fixed-mobile services spiced up with exclusive TV content such as Premier League soccer games.

The EE move also revives BT’s rivalry with Vodafone which dates back to when they were the two biggest names in British telecoms until a heavily indebted BT dropped out of the mobile market in 2001.

The prospect of a BT which has since been emboldened by the success of its broadband strategy now jumping into top spot in the mobile market has already caused Vodafone to review its strategic options, including whether it should buy cable operator Liberty Global.

Meanwhile Hutchison Whampoa, owner of Three, the smallest of Britain's four mobile network operators, has been contemplating making a bid for O2 if BT doesn't buy it, sources have said.

“BT have done a fantastic job in the last five years,” a telecoms industry executive said about the group which was still on its knees in 2008 and 2009 with two major profit warnings.

“Vodafone could have taken its time, over the next three to five years, (to buy or build its own fixed-line network) but with BT buying a mobile business they’re going to have to do something pretty quickly now.” – (Reuters)