Vodafone plans to wade into the UK pay-TV business, in a move that would further shake an industry reeling from BT's £900m swoop for the rights to Champions League football.
The plan is high on the agenda, group chief executive Vittorio Colao said at the company's half-year financial results on Tuesday.
"We will offer unified, converged, multiscreen services in all countries. What that will look like in Britain I don't know yet," Colao said. "We have a new chief executive of the UK starting and they will help develop the strategy … I will be doing a lot of thinking in the next few months about the impact of telecoms companies owning content."
Vodafone has earmarked £19bn to upgrade its networks over the next two years, £7bn of which will come from the sale of its US business, Verizon.
Promising "perfect voice" services with 50% fewer dropped calls and the best 4G mobile internet services in Europe, Vodafone said it will invest £1.2bn in the UK, including £300m of Verizon cash. Its efforts will be focused on London, with £150m spent improving coverage in the capital.
"We really can make a difference in a way that our competitors cannot catch up on," said its finance director, Andy Halford. "We want to create some blue sky between us and the rest."
Verizon cash is also being used for a bumper shareholder payout and to reduce debt. Vodafone will use its stronger balance sheet to fund more acquisitions. Some of those are expected to be in the pay-TV arena.
The announcement that Vodafone is considering offering what marketers call quad play – TV, landline, broadband and mobile services – in its home country marks a change in stance.
The group had previously said it would avoid Britain's overcrowded subscription TV arena; TalkTalk, BT, Virgin Media and Sky are competing alongside internet film and TV subscription services such as Netflix and Apple's iTunes.
Vodafone will not rush into an expansion of its British business, but Jeroen Hoencamp, who stepped up to run Vodafone's UK business on Monday, has the task of devising the strategy. This could involve acquiring another company or going into partnership with one.
Colao said Vodafone had discussions with Liberty Global, which bought Virgin Media earlier this year, about sharing content and networks, although the talks did not result in a deal. Last month, Virgin extended its contract with EE, whose masts it uses for its Virgin Mobile virtual network.
In Europe, where many former national telecoms companies held on to their mobile phone businesses, Vodafone is under pressure because wireless services are sold at knockdown prices to attract customers to fixed-line broadband.
Orange owns the French national broadband network and a string of mobile businesses throughout Europe. In Germany, where T-Mobile is owned by Deutsche Telekom, Vodafone has moved into TV by acquiring cable company Kabel Deutschland.
Britain differs because BT spun off its Cellnet mobile business as a separately listed entity which eventually became O2. However, fresh from the launch of its sports channels, BT is planning its virtual mobile network in partnership with EE next year.
Investors are speculating that, despite plans to turn itself into a multimedia group, Vodafone could ultimately be sold off. America's AT&T, which has no assets in Europe, is thought to be weighing up a bid for Vodafone or EE in Britain.
"There is every reason for AT&T, or other candidates, to be interested," said Robin Bienenstock, an analyst at Bernstein Research. "Speculation on Vodafone as a potential acquisition target will continue to support the stock.".
Vodafone is hoping to spend its way into a leading position to take full advantage of the predicted European recovery. However, its revenues are under pressure. Financial results for the six months to 30 September show service revenue – which includes calls, texts and data charges but excludes handsets – was down nearly 5% across the group, with southern Europe falling nearly 16%.
"We are seeing this as an opportunity to over-invest to prepare for economic recovery," said Colao.
The moves Vodafone might make
Sign a Partnership Vodafone could secure a network-sharing deal with BT or Virgin Media, leasing broadband lines in exchange for sharing its mobile network. But both companies have recently committed to EE.
Acquire Liberty Global Liberty bought Virgin Media earlier this year and its shares rose sharply in August on speculation Vodafone might buy the European cable TV group.
Acquire BSkyB Rupert Murdoch's satellite company is not up for sale but if BT were to win the lion's share of Premier League rights in 2015 it might be.
Acquire TalkTalk The budget pay-TV operator has a growing tribe of 4 million customers and would be a smaller mouthful to swallow than Sky, but it does not own a fibre network.
Sell to AT&T The Texan telecoms behemoth is looking for trophy European assets and is thought to have Vodafone on its shopping list.
• This article was amended on 13 November 2013. An earlier version said BT Cellnet eventually became T-Mobile. This has been corrected to O2.
